Mayor Rahm Emanuel faces a hole of at least $426 million in the 2016 city budget he soon will unveil, but in reality the deficit in city finances over the next year could approach $1 billion, depending on what happens with his bill in Springfield to revamp police and firefighter pension plans.

That's the bottom line on new financial data released today by city officials, which strongly suggest Emanuel is likely to propose a record nine-figure property tax hike in the proposed budget for 2016 that he will unveil in mid-September.

The 2015 financial analysis sets next year's projected budget hole at $426 million, with $233 million coming from day-to-day operations. That's a bit of an improvement from recent years, in which the city at this point in its budget cycle was looking at budget gaps of $339 million in 2014, $369 million in 2013 and $636 million in 2012.

To that $233 million, the city adds $100 million in early debt repayment that it intends to make instead of just reissuing the debt at higher rates, and an extra $93 million for pensions, for a total preliminary deficit of $426 million.

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Not included in that figure is a minimum of $328 million in additional payments to the underfunded police and firefighter retirement systems that would be required under a bill that has passed the Illinois General Assembly but has not yet been signed into law by Gov. Bruce Rauner.

The money technically is a 2015 obligation, due some time in 2016. Effectively, Emanuel has to come up with $426 million for operations plus $328 million for police and firefighter pensions. But the city hasn't indicated where it will get that money, which will come in the form of higher taxes, service cuts or both.

'OVERWHELMED BY THE PENSION'

And if Rauner doesn't sign the mayor's bill—the governor has signaled general support but tied the issue to his wider anti-union agenda—the city next year will have to come up with an additional $221 million under current state law. That would mean the total extra money or cuts that could be needed next year would be $977 million—better than a quarter of the city's current core corporate, or operating, budget, which is projected to hit $3.7 billion next year.

"We've made enormous amounts of progress on the (operational) structural deficit," city Budget Director Alex Holt said in a phone interview. "But all of that progress could be overwhelmed by the pension costs we face."

Holt said no decisions have been made on how to finance the $328 million minimum payment that will be needed for police and firefighter pensions. The administration also hasn't determined whether the payment will come out of 2015 revenues, 2016 revenues, savings or something else.

However, the city will not tap its reserves, including $500 million banked when the city entered into a long-term lease of the Chicago Skyway a decade ago. "All (other) options are on the table," Holt said.

The city could catch a short-term break as a result of a July 24 ruling by a Cook County Circuit Court judge tossing out a financial restructuring of two other pension funds that cover white-collar workers and laborers. The city has appealed the order. But if it wins short term, it would lose long term.

If the decisions stands, the city no longer will have to make extra payments required by the law that has been struck down, saving it an estimated $130 million next year, Holt said. But that could drive the funds toward insolvency or force an even more expensive restructuring later.

Emanuel has begun meeting with aldermen and in August will hold a series of town hall sessions with citizens, officials said. The budget itself is set to be released the second week of September.