Emanuel Working Clout as He Inherits $587 Million Chicago Gap

Rahm Emanuel completed Chicago’s first transition of power in 22 years, taking the reins of the third-largest U.S. city today from Mayor Richard M. Daley with a show of clout as President Barack Obama’s former chief of staff.

Emanuel, 51, was sworn in at Pritzker Pavilion, part of the gleaming and overbudget Millennium Park development that symbolizes both Daley’s remaking of the city and his failure to control costs. Emanuel will inherit a projected 2012 budget deficit of $587 million.

“We simply can’t afford the size of city government that we had in the past,” he told a crowd that gave his predecessor a standing ovation. “While we are not the first government to face these tough questions, it is my fervent hope that we become the first to solve them.”

Vice President Joe Biden attended the ceremony along with Treasury Secretary Timothy F. Geithner, Transportation Secretary Ray LaHood, Labor Secretary Hilda Solis and White House Chief of Staff William M. Daley, a younger brother of the outgoing mayor.

“Rahm has a lot of friends in this administration because he helped many of us get these key posts that we have,” LaHood, a Republican who served in Congress with Emanuel, said in a telephone interview from Peoria, Illinois, his hometown.

Filling a Resume

The White House delegation was a fresh reminder of the political influence that Emanuel brought to the mayor’s race after leaving his West Wing job in October to return to his and Obama’s hometown. His new position fills a gap in that resume, LaHood said.

“This is a different ballgame for him,” he said. “This is not legislative, this is administrative. The truth is, Rahm has never had an administrative post before.”

While criticizing the budget-cutting approaches of some Republican politicians, Emanuel called for a smaller and smarter city government that would demand sacrifices from everyone.

“I reject how leaders in Wisconsin and Ohio are exploiting their fiscal crisis to achieve a political goal,” he said. Yet “we will do no favors to our city employees and our taxpayers if we let outdated rules and outmoded practices make important government services too costly to deliver.”

Emanuel hasn’t been shy about reminding residents of his Washington ties. When the Illinois Supreme Court ruled in his favor in January on whether he had the proper residency status to run for mayor, Emanuel made a point of noting his phone calls in the minutes after the ruling.

Powerful Friends

“I immediately called my wife,” he said. “I also called my parents, and I took a call from the president of the United States.”

Emanuel referred to his spouse, Amy Rule, as he spoke of his intent to address the quality of the city’s education system, which Daley took control of during his tenure.

“As some have noted, including Amy, I am not a patient man,” Emanuel said today. “When it comes to improving our schools, I will not be a patient mayor.”

Soon after his swearing-in, his transportation advisers will go to Washington to discuss high-speed rail and other projects with LaHood’s staff, the transportation secretary said.

“Rahm is going to have some very, very strong and significant partners in this administration because he wants to get things done,” LaHood said.

He’ll need the help as he takes over a smaller city, challenged with the budget shortfall and an unfunded pension liability of $41,966 per household, according to an October report by economists at Northwestern University and the University of Rochester.

Credit Downgrade

Daley repeatedly tapped reserve funds from lease deals on 36,000 parking meters and the Chicago Skyway toll road to balance the budget -- steps that led Standard & Poor’s to cut Chicago’s credit rating on Nov. 5 by one level to A+, the fifth- highest grade.

“The way to solve the financial problems is to be as attentive to the structural problem and not approach them with cosmetic solutions,” said Gery Chico, a former Daley chief of staff and one-time president of Chicago Public Schools.

Chico, who placed second in the six-person February mayoral election that Emanuel won with 55 percent of the vote, said his former rival is “certainly up to the task of corralling the finances.”

During the campaign, Emanuel was more vocal than other candidates in his calls for “shared sacrifice” by those who work for a city of 2.7 million people that is also home to Boeing Co. (BA) and United Continental Holdings Inc. (UAL), the world’s biggest airline.

Immediate Cuts

The Daley administration is working with Emanuel’s transition team to identify $75 million in immediate cuts that Emanuel has said he wants to make, outgoing Chicago Budget Director Eugene Munin said May 6.

The city needs a “young, fresh and more energetic approach,” Laurence Geller, president and CEO of Chicago-based Strategic Hotels & Resorts Inc. (BEE), said in a telephone interview from Paris.

“He has a chance to take on some of the sacred cows in the city,” Geller said, pointing to the wage and benefit packages of public employees.

Daley, 69, Chicago’s longest-serving mayor, chose not to run for a seventh term. He and his father, Richard J. Daley, ran the city for a combined 43 of the past 55 years. The younger Daley oversaw demolition of public housing high-rises, the renovation of Navy Pier and the opening of Millennium Park.

Pricey Park

Like the pier, the 24-acre lakefront site has become one of Illinois’s most popular tourist attractions, though it opened four years late and at a cost that was $325 million more than the Daley administration’s original estimate of $150 million.

Emanuel didn’t follow the route that spawned generations of Chicago politicians: through ward organizations like the Daley family’s power center in an Irish-Catholic enclave on the south side. Emanuel, who will be the city’s first Jewish mayor, was born in the city before moving to its wealthy northern suburbs as a child. He attended Sarah Lawrence College in Bronxville, New York, and studied ballet.

He came back to Chicago and in 1989 worked as a fundraiser for Daley’s first successful mayoral campaign. Emanuel won his first public office in 2002, becoming a congressman for a district that includes parts of the city’s north side and northwest suburbs.

Next Incarnation

Chicagoans are waiting to see what incarnation of Emanuel they get -- the Washington powerbroker known for his profane outbursts or the more subdued candidate they saw on the campaign trail.

The one certainty, LaHood said, is a mayor who exudes self- assurance, not unlike his predecessor, who once sent backhoes in the middle of the night to carve X’s into the runway of a lakefront airport he wanted closed.

“I don’t think he’s losing any sleep about these huge problems, because he’s such a confident person,” LaHood said.

To contact the reporters on this story: Tim Jones in Chicago at tjones58@bloomberg.net John McCormick in Chicago at Jmccormick16@bloomberg.net

To contact the editor responsible for this story: Flynn McRoberts at fmcroberts1@bloomberg.net

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