CHICAGO — After dipping deeply into reserves to balance its 2009 and 2010 budgets, financially strapped Chicago is asking the public finance community for help in coming up with “creative ideas” to raise revenue or cut costs.

Finance team members outlined the city’s fiscal challenges and made their request for helpful solutions at a meeting Thursday with more than 90 investment bankers, financial advisers, and other municipal participants.

“Chicago, like every major city in America, faces serious financial challenges as a direct result of the nation’s worst economic recession in modern times,” said Gene Saffold, the city’s chief financial officer. “We welcome the ideas of ­financial experts to help us find new ways to control spending, generate new revenue, and improve the management of ­government.”

For the first time in recent history, the city also is requiring broker-dealers to formally submit their qualifications to work on city bond deals. The deadline for underwriters, financial advisers, and swap advisers to submit their qualifications is Friday, while potential revenue-generating financings or other ideas are due by early next month.

The city will use the responses to craft qualified pools of financial advisers, senior managers, and co-managers for a term that would run three years, with a possible two-year extension, though the city could terminate the pools at any time.

Chicago will also allow additional firms during the term to apply in February and August. The city has over at least the last decade observed an unwritten policy of working with any firms deemed qualified as long as they had an office here.

During last week’s meeting, Saffold and budget director Eugene Munin discussed the performance of the city’s economically sensitive revenues — like its sales and real estate transaction taxes — and how the last two budgets were balanced, the status of the city’s reserves, and the city’s goal to preserve its current ratings.

Chicago’s budget is being further pressured by the looming threat that Illinois will withhold a portion of the city’s share of income taxes to balance its own books.

Several municipal participants at the meeting said Saffold and Munin did not ask for ideas or financing proposals to address specific challenges, like a pension obligation borrowing to cover the city’s mounting unfunded liabilities, instead leaving the door open for a broad array of approaches.

“The city is asking the public finance community to be as creative as possible. It makes sense to turn to the public finance community, who sees how other municipalities are dealing with budget problems,” said one banker.

Mayor Richard Daley last month ordered city departments to cut non-personnel spending by 6% to save $11 million to offset soft revenue collections. The order affected all non-public-safety departments. Daley also has told agency heads to keep spending level in their 2011 budget proposals unless there is a “compelling” reason to raise spending. A hiring freeze also remains in place.

“While it is still far too early to determine if this year’s conservative revenue projections will continue on track, we know that we will continue to face large deficits this year and for the next few years, as the economy slowly recovers,” Daley said.

The city’s flexibility to balance its budget — without turning to politically difficult solutions like a property tax increase or deep service cuts — is limited as Daley dug heavily into reserves last year to erase a $520 million deficit in the $6.14 billion budget.

The budget wiped out the deficit with $118 million in savings from debt restructuring and the use of $250 million from a $400 million long-term reserve account and $100 million from a mid-term reserve, both of which were created with funds from the $1.14 billion, 75-year lease of the city’s parking meter system last year. About $730 million in reserves remain.

The city’s resolve to leave its $500 million budget reserve, established with proceeds of the $1.8 billion Chicago Skyway toll bridge lease in 2005, helped fend off any negative rating action.

The city’s $6.5 billion of GOs are rated AA with a negative outlook by Fitch Ratings, Aa3 with a stable outlook by Moody’s Investors Service, and AA-minus with a stable outlook by Standard & Poor’s.

Chicago’s pension funding levels also remain a key challenge. The city’s firefighters fund closed out fiscal 2008 with a funded ratio of 39.8% followed by the police fund at 47.3%, and then the municipal employees fund at 62.9%.

The Chicago laborers’ fund is healthier at an 86.8% ratio. Daley is awaiting a report from a 32-member commission he named two years ago to recommend solutions.

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