Muni Problem in 2009

I just got my annual property assessment used for my taxes, and for the first time ever, it was down about 7% from the prior year. Property taxes make up most of the city's revenue, and are a linear function of the assessed property value. This is for taxes payable in 2009, which are paid in March and September of that year. My city has gotten used to an increasing tax base of 7% per year for 20 years, plus growth in the number of houses, so actually cutting the budget by 7% will cause a lot of political problems. I imagine a fraction of cities facing this issue won't make it without getting more money to finance the shortfall. It won't hit this year, but it seems like a train wreck coming. Poor cities, I'm sure, won't get more money, especially now that we know the muni insurers (Ambac, MBIA) can not handle a broad set of defaults.