City Manager Roger Crum stared out the window of his office at the Evanston Civic Center Wednesday morning, watched a few snowflakes fall from the sky and thought of dollars.

“No snow! Snow means overtime. Overtime means money,” he said, referring to the city’s responsibility to keep its streets clear and pay the workers who do it.

With a proposed $138 million budget for Evanston, including drastic program cuts to offset an almost $4 million deficit, putting price tags on things – even snow – comes automatically to Crum. As he said, “You’ve got to think in budget terms these days.”

This year the city is in particularly bad financial straits because of the recession and unexpected legal expenses for several lawsuits against the city. This year’s problems are severe, but they belong to a pattern that has shaped Evanston’s finances for decades.

Evanston’s budget difficulties go back at least as far as the 1970s. The combination of a diverse economy, dense population and small tax base has created a seemingly never-ending situation where the city has trouble generating enough revenue to cover its expenditures.

The problem is structural, hard to fix and unlike that of any other North Shore community, Crum said.

Almost from its inception, Evanston has been home to both high- and low-income residents. Because of this economic diversity, the city has always had more demand for social services than its wealthier northern neighbors Wilmette and Winnetka.

Evanston provides numerous programs designed to aid lower-income residents, including a low-income nursing and dental program and an emergency financial assistance program.

But caring for people costs money. In general, cities get money for specialized programs from property and sales taxes and fees for city services. Chicago, which must provide much more in terms of social services than Evanston, can do so because its population size and area allow it to generate sufficient revenue.

Evanston is only 8.5 square miles with a population of almost 75,000, making it one of the densest cities in Illinois. The population is quite large in proportion to the amount of revenue that is generated, Crum said. This makes it difficult to pay for all the services residents demand.

In some communities, raising property taxes might be the answer to a budget deficit. In Evanston, however, numerous non-profit organizations – including Evanston and St. Francis hospitals, Northwestern and about 90 churches – combine to remove 45 percent of the city’s land from the tax rolls. This means that the people who do pay property taxes pay the city about $10 for every $1,000 of their homes’ assessed values.

Residents comprise the majority of the tax base, and they are close to the limit of how much they will pay, said Bill Stafford, the city’s finance director.

Over the years, Evanston has tried to lessen the tax burden on residents by attracting revenue-generating businesses to the city. But the city has been hampered by the high taxes Cook County levies on businesses – a level about twice the tax rate for residents.

For several decades, Evanston saw the gradual escape of the few manufacturing companies it had. Taxes also doomed the city’s efforts to market itself as a corporate headquarters and attract office buildings during the 1960s. In addition to the high taxes, many large businesses avoid Evanston because it is not near a freeway, freight line or airport.

Crum said the trend of businesses leaving Evanston bottomed out in the 1980s and since then the city has tried to build a tax base founded on small retail shops.

The final factor contributing to Evanston’s financial problems is that the city is “a net exporter of income tax,” Crum said. Each year Illinois residents pay an income tax to the state which goes into a single pot and is then redistributed to cities on a per capita basis.

While Evanston receives money from the property of wealthy residents, the city does not benefit from their income. Evanston has fewer people than faster-growing cities and, as an older city, it has a slower rate of growth.

Evanston’s budget problem is real and long-term, Crum said. He said he does not expect the budget process to become any easier in the immediate future.

“That’s what makes Evanston what it is,” he said. “It gives it character but it also gives it problems.”