A new report from the city of Chicago's outgoing chief financial officer indicates Mayor-elect Lori Lightfoot faces an estimated $740 million budget shortfall as she prepares to take over for Rahm Emanuel.

Initially, Emanuel's administration predicted the budget shortfall would be around $500 million but Wednesday's report suggested they were off by nearly $200 million due to poor performance by the city's pension investments and "the city's move away from so-called ‘scoop-and-toss' borrowing — the practice of paying off old debt by creating new debt."

The increased shortfall comes even as the city has seen a higher than expected increase in tax revenue according to the report released by Carole Brown, the outgoing CFO.

A large part of the shortfall is due to "the expected cost of retroactive pay hikes the city will have to finance when current negotiations over a new contract are resolved" for police and firefighters.

The nearly three-quarters of a billion dollar budget gap represents approximately 20 percent of the city's total operating budget.

Lightfoot recently suggested the city was in a "dire" financial situation after an April briefing from budget officials in Emanuel's administration. In a press conference Friday she contested the Emanuel number, saying, "It's worse than that. I'm not sure why they choose to put that number out because it's not accurate."

The $740 million shortfall is only slightly larger than the $650 million deficit Emanuel inherited when he took over as mayor in 2011 after serving as President Barack Obama's first chief of staff.

In an attempt to shore up the city's finances during his tenure, Emanuel instituted what the Chicago Tribune described as "record tax hikes," including property tax increases and "increases in garbage fees, cable taxes, city vehicle sticker fees, and parking garage taxes."

Emanuel opted to not run for a third term in 2019 after polls showed his approval rating hovered around 30 percent following controversial spending cuts that closed dozens of schools in the city as well as his administration's handling of the police-involved shooting of Laquan McDonald.

Lightfoot will be sworn in as mayor during a Monday ceremony, becoming the first African-American woman to lead the nation's third largest city.