ERIE -- It's an aging industrial city with a new mayor who is trying to stave off a state takeover of its finances, all the while saddled with expensive union contracts and declines in revenue and population.

Sound familiar?

A year after Pittsburgh entered a state-mandated financial recovery plan under Act 47, its smaller northern neighbor on Lake Erie has taken a step to try to avoid the restrictions which come with Act 47 status for distressed cities.

Erie is participating in the state's Early Initiative Program, which is designed to help struggling cities get back on their feet financially with an emergency plan for the first year and then a longer term, five-year plan.

"We need to make it happen," said Rubye Jenkins-Husband, who began her third term on City Council as this year's president. "But, like any good process, you have to be willing to work at it and put the time in to make it work."

On Dec. 31, Erie's council, which, at the time, included new Mayor Joe Sinnott, approved several revenue streams to help stop the financial bleeding, including an amusement tax and increases in the property and occupational privilege taxes and garbage and sewage fees. The taxes, predictably, are not popular.

The city also in the past year pared its work force by about 100, including about 60 police officers and firefighters. That has been another unpopular move among people concerned about public safety.

The job reduction was felt immediately.

The second week of Mr. Sinnott's term as mayor, the city was without a switchboard operator, a job left vacant after eight workers in a billing department were laid off. And, in December, the city dumped its janitorial staff, which led to overflowing trash cans throughout municipal offices. The city ended up hiring a private firm for its janitorial services at a savings of about $100,000.

"If anything comes out of crisis, it certainly limits your options, but it has gotten people's attention," said Mr. Sinnott, a lawyer who served two years on council before his mayoral election last year. "I think the issues have become fairly well defined, and what we need to do, in time, is fix this so we're not revisiting these issues every 10 years or so."

Some of the tax and fee increases were recommendations included in a series of reports last year by Joseph Hohman and his company, Resource Development and Management Inc., based in Wilkinsburg. The company has helped several area municipalities through distressed status, including East Pittsburgh and North Braddock.

Erie has its challenges.

The former mayor, Rick Filippi, spent his last year in office facing state charges that he and two other men used inside information to buy land near a proposed racetrack and casino. His trial is pending. Mr. Filippi ran for re-election, but came in fourth in last year's primary election, in which Mr. Sinnott garnered 32 percent of the vote. Mr. Filippi was the first incumbent Erie mayor in 40 years to lose.

The city owes $2.77 for every $1 in its coffers and has an overall deficit this year of $27.5 million. The combination of new taxes and fees and layoffs are expected to whittle down the city's $7 million operating deficit this year so it can go to work on the larger deficit, Mr. Sinnott said.

Most of the budget, 71 percent, is spent on employee costs, which are rising every year. Public safety costs alone make up 44 percent of the budget and are increasing by 5 percent a year, prompting Mr. Sinnott to cite recommendations from the Hohman report when he recently asked the unions for concessions.

Four unions represent the city's 660 employees, the American Federation of State, County and Municipal Employees; the Teamsters; the Fraternal Order of Police; and the International Association of Fire Fighters.

The city is negotiating with AFSCME, whose members are working under a contract which expired Dec. 31. The Teamsters' contract expires at the end of the year, but police have three years and firefighters have two years left on their contracts.

A few weeks after his election in November, Mr. Sinnott asked union leaders to approach their members with a concession package which would require a 15 percent payment for health insurance and a wage freeze this year. Erie's unionized employees do not contribute to their health care, but Mr. Sinnott required administration employees to pay 15 percent as of Jan. 1.

None of the unions has responded, but Mr. Sinnott said he was not discouraged.

"Until I get a vote that says, 'No,' I'm going to remain optimistic. I'm asking them to do something that they absolutely don't have to do."

And the unions understand that.

"His requests were so outrageous, we didn't even take it to a vote of the membership," said Joe Walko, president of the firefighters union.

The FOP did take the concessions request to its members, who voted to table the issue, said John Barber, who will take over Feb. 1 as union president.

A sore spot with police and firefighters is the fact that they agreed last year to change their health care coverage from an indemnity plan to a managed care plan at a total savings to the city of $1.1 million. The city responded, they say, with the layoffs of 36 firefighters and 24 police officers.

"Any changes have to go to a vote of the membership, and it's pretty hard to get them to approve concessions when they're laying people off," Mr. Walko said. "We realize the city's in economic distress, there's no doubt about it. But it really [ticks] me off when they put the onus on the unions."

And what happens if the city's unions don't agree to concessions?

"That's the million-dollar question," Mr. Sinnott said. "It's definitely going to be more difficult."

The failure of the unions, particularly police and firefighters, to consider the concessions is not sitting well with some people in Erie.

"There's a sense that if you really cared about the city and cared about safety, you would be willing to give a little," said Susan Moyer, executive director of the Bayfront East Side Task Force, an organization which represents a neighborhood bordering downtown.

Though the consultant's report recommended a reduction in Erie's work force, its authors cautioned against drastic reductions in the police force because of the adverse impact on public safety and the costs of increased crime. The consultant recommended police staffing at 180 officers; the department, with layoffs in the past two weeks, has 162.

The police layoffs have caused a dramatic shake-up in assignments and stripped many of the department's traditional posts, including detectives and investigators for vice and juvenile crimes and motorcycle officers, Mr. Barber said. Reassignments from the layoffs are designed to put more officers on the street, but Mr. Barber predicts the shortage of officers will be felt soon.

And that's a concern to residents.

"Those quality-of-life issues are a big concern to us, especially with our new homeowners," Ms. Moyer said. "If you don't have safe neighborhoods, you can't attract people."

Despite the gloomy scenario, some in Erie said there was reason for hope that the city and region would weather this financial storm.

The business community, for one, is trying to paint a positive picture of Erie's economic landscape.

"We're all concerned about the image it projects that we are a city on the brink of bankruptcy," said Jacob A. Rouch, president and chief executive office of the Erie Regional Chamber and Growth Partnership. "To me, the frustrating aspect of this is that people would draw a conclusion about the region's economy based on the city's finances, and that's just not a fair comparison."

Mr. Rouch pointed to a number of economic development projects under way or in the planning stages as examples of Erie's "economic vibrancy." Included are Erie's $45 million convention center and a $55 million neighboring hotel, the redevelopment into a light industrial park of the old International Paper Co. plant site, a $28 million facility being built by Saint Vincent Health Center and a $55 million extension of a runway at Erie International Airport.

Then there's the racetrack and casino proposed for nearby Summit which could provide millions in revenue to that municipality, Erie County and the city. But exactly how much the gambling operation will bring in is a matter of debate.

One of the issues used by Mark DiVecchio, Erie County's new chief executive, during his campaign was a proposal to give $2 million to Erie from the county's estimated $9 million gambling revenue windfall. Mr. DiVecchio still thinks it's a good idea, though he says the county is still not sure how much it will get from the operation.

Mr. Sinnott said it was also important the city obtain payments in lieu of taxes from its nonprofit entities, such as Saint Vincent Health Center, Hamot Medical Center, Gannon University and Mercyhurst College, a primary recommendation of the economic consultant.

"That's as big a key to keeping us out of Act 47 as anything else," Mr. Sinnott said.