CHICAGO — Indiana auditors warned that the long-struggling city of Gary could face insolvency as it tries to overcome massive drops in property tax revenue tied to the state’s two-year-old tax cap legislation.

“The amount of budget reductions that would be required for the city to fully implement the current tax legislation raises substantial doubt about the city’s ability to continue as a going concern,” said the annual financial report for fiscal 2009, issued Sept. 30 by the State Board of Accounts.

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