The correct answer to this open question is the following.
As the city manager and knowing that the budget is tight, I would choose to raise taxes and cut programs. The programs I would choose would be the ones that have less impact in the medium to lower classes. I would establish the priorities of the government that clearly are the creation of jobs and health services. I would sell my idea to the city council and the residents of your city that this is the best option in that I would tell them that these are temporary measures while the economic situation could be transformed in 6 to 12 months. The government would save some money stopping unnecessary expenditure, and there will be some financial incentives to entrepreneurs and businessmen that decide to create new business in the city.