LYNN – Caught in the middle of a financial tug of war, Mayor Edward J. Clancy Jr. painted a bleak picture for fiscal 2009 at his annual State of the City address at the Porthole Restaurant Thursday.Quite possibly the tightest financial plan in recent years, Clancy calmly braced the city for a roller coaster of a ride this budget season.”In terms of the economy, we are squarely in the midst of the worst of times,” he said. “Or at least we hope it’s the worst.”Clancy said tough and often unpopular decisions have been made thus far, in what he said were made in the best interest of the city’s 89,000 residents.”Yet, despite our prudence, the outlook for fiscal 2009 is, quite frankly, bleak,” he said. “We are locked into increasing fixed costs such as health insurance, pensions, workmen’s compensation claims and skyrocketing energy bills that have caused a financial crisis beyond the scope of a municipal government to control. They’re icebergs.”Despite the grim outlook, Clancy said he is not interested in employing user fees for students in extra-curricular activities, nor proposition 21/2 tax overrides.”Neither of these has darkened our door,” he said.Clancy likened the current fiscal crisis to tectonic plates beneath the earth’s surface, which he said represent Chapter 150E, the collective bargaining law.”They’re crashing against the stricture of Proposition 2 1/2, which places a limit on the amount a community can raise through property taxes,” he said. “In essence, the irresistible force meets the immovable object.”Clancy said one definite way to save money would be for the city to sign on to the state’s Group Insurance Commission (GIC) plan.With health insurance projected to rise 63 percent next year, Clancy estimated $8 million would be lost between the current fiscal year and next fiscal year, because employees aren’t switched over to the GIC plan.”All of the cuts at the School Department wouldn’t happen and we could expand the Police Department, but the opposite has happened,” he said. “It’s something I think frankly should be done.”However, until that happens, Clancy said the city has streamlined municipal services, consolidated departments, pocketed away profit from sales of homes built on the site of former nursing homes, and signed a new lease with a company that manages Gannon Golf Course. Clancy said the city has tightened its belt where possible, while still maintaining essential services.”This has been done while raising property taxes on the average of 3.7 percent per year over the last six years,” he said. “This is a smaller increase than almost every other community in the Commonwealth of Massachusetts and consistent with the rate of inflations and consumer price index over the same time period.”Still, despite tough times, Clancy highlighted a few of the city’s achievements, including the nearly-completed Manning Field project, a refurbished Frasier Field that will be home to the North Shore Navigators, a revamped city Web site, the restoration of Veterans Memorial Auditorium, and the addition of hundreds of new residents downtown.The recently approved Waterfront Master Plan, which promises to revitalize the waterfront, and the relocation of the power lines on the Lynnway, is nearing reality, Clancy said.Another long awaited project – the extension of the Blue Line – is still a possibility as well.”Gov. Deval Patrick stopped short of guaranteeing the Blue Line – he certainly gave us a reason to be optimistic,” he said.Overall, Clancy said his message to the residents of the city is neither pessimistic nor optimistic, but realistic.”The progress that has been made in the last seven years is real, the problems that we face moving forward are real, and our unyielding commitment to solve those problems is real,” he said.