New York City is managing its way through its greatest fiscal challenge in decades as the recession ripples through the local economy and takes a heavy toll on tax collections. To help balance the FY 2010 budget in the face of a $6.8 billion drop in anticipated tax revenue, as well as to narrow the out-year budget gaps, the City has raised property taxes, slashed agency and capital spending, obtained extraordinary federal assistance, reached agreement with the municipal unions to reduce health care costs, and drawn down reserves built up during the last economic boom.