The mayor of Raceland, Ky., informed a startled city council at an emergency meeting Wednesday night that the Internal Revenue Service has seized close to $100,000 from the city coffers because of non-payment of 2006-2007 taxes.

The amount constituted most of the town's entire cash-on-hand budget, according to local station WSAZ. The town plans to lay off city workers and cut back on police and fire protection, but the mayor said that fire trucks would still run and police would respond to calls.

The mayor blamed the IRS for not sending the city proper payment notices and not giving Raceland a payment plan before seizing the assets. The city council has voted to borrow $75,000 to meet its immediate needs. The city clerk said the town has managed to pay its 2008 taxes so far.

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