I'm unclear about how perspective would make one object occlude another when they're distant but not when they're close. Things' angular diameter will shrink and parallel lines will converge and so on, but nothing (like lake Michigan) is going to jump in front of something (like Chicago) just because they're far away. One will still be above the other, just smaller.
Also, you said that this effect disappears when you look through a telescope, that picture is obviously taken using a telephoto lens from some distance away, why is the bottom half of the city still below the horizon? The top half seems distinct enough.