The city will continue to pay him his full salary, and he will donate 10% back.  

It's assumed his W-2 will show his full salary and will be taxed accordingly.  Most of the city employees have agreed to some form of cutbacks through work hours or work pay.  Because his salary is tied to retirement benefits the city is prohibited from reducing his salary to provide the budget relief.

The city is the one benefiting.  

Since the letter he received does not indicate that the W-2 will indicate the reduction, my client is trying to balance out the taxes for income he will not receive by possibly deducting a charitable contribution.