CHICAGO (Reuters) - Chicago's massive budget deficit is a threat to the city's economic future, Mayor-elect Rahm Emanuel warned on Wednesday as he unveiled a finance team to tackle fiscal problems.
"The challenges we face are daunting and a new comprehensive approach is necessary," Emanuel told reporters. He promised a spending freeze and a plan to cut $75 million from the current $6.15 billion all-funds budget, which includes a $3.26 billion operating fund.
Emanuel, who takes office on May 16, roughly pegged Chicago's budget deficit at $500 million to $700 million.
He said the city's practice of spending more money than it takes in cannot continue and that future budgets will "look very different from those we've seen before."
He named Lois Scott, a municipal finance veteran, as chief financial officer. Scott is president of Scott Balice Strategies, a financial advisory firm. The new comptroller, Amer Ahmad, also has a background in municipal finance, serving as head of KeyCorp's public sector group since January. Prior to that he was Ohio's deputy state treasurer.
Alexandra Holt, an attorney at Baker & McKenzie and a former Chicago deputy budget director, was named budget director.
Emanuel said he will form a council headed by new Deputy Mayor Mark Angelson to examine Chicago's budget "top to bottom," noting that he found similar councils achieved results for Presidents Bill Clinton and Barack Obama when he worked for those administrations.
Like other U.S. cities, Chicago's revenue tanked due to the economic recession, while the housing market collapse eroded property values and depressed real estate transaction tax collections.
Chicago's record-high $654.7 million deficit heading into fiscal 2011, which began on January 1, was addressed in the budget of current Mayor Richard Daley with reserve funds and various cost-saving measures.
The use of reserve funds, however, was cited by Wall Street rating agencies when they downgraded the city's general obligation bond ratings last year.
Last week, Daley announced that revenue was perking up, allowing the city to return $50 million to a reserve fund and carry over about $45 million in unspent cash from fiscal 2010 into the current budget.
(Reporting by Karen Pierog; editing by Leslie Adler)