CHICAGO -- Impoverished East St. Louis, Ill., and its new mayor appear to be making some progress toward alleviating the financial and social ills that plague the city.

Mayor Gordon Bush said in an interview last week that the city is starting to get its affairs in order. City employees have been paid on time since he took office in May, a state financial watchdog group last week lent the city $3.75 million to ensure that essential services will be provided, and a state-funded 13-member special drug enforcement unit has cut down on overt drug-dealing.

Mr. Bush said city workers have reacted positively to the new administration. "Our immediate goal was paying our employees on time," he said. "We have met all our payrolls on time since taking office, and city worker morale is tremendously higher."

The new mayor scored an overwhelming victory over 12-year incumbent Carl Officer in the February Democratic primary. In April, he ran unopposed in the general election.

Mr. Bush said next item on his agenda is working with the East St. Louis Financial Advisory Authority, the state fiscal watchdog group, on hiring an outside consultant to implement a city accounting system. Once that is done, the city will determine the exact amount of its outstanding debt, now estimated at $50 million, and ask the authority to issuee $30 million of bonds to be used to restructure that debt.

The authority was created last year after passage of the Illinois Financially Distressed City Law, which set up a general framework for bailing out troubled cities. The law was drafted specifically with East St. Louis in mind.

East St. Louis's finances had reached the point where there was no money to fix broken police and fire vehicles or pay for garbage collection. About two-thirds of East St. Louis' 50,000 residents are on welfare.

Under the law, East St. Louis is required to pay debt service on any bonds issued by the authority. If the city failed to make such debt service payments, it gives the authority the power to intercept the city's annual $ 3 million of state income and sales tax revenues. The bonds also would carry a moral obligation pledge of the state.

Mr. Bush said he hoped to reach an agreement with the authority on selling the $30 million issue and restructuring the outstanding debt in the next two months.

Mr. Bush added that he hopes to include in that restructuring a new settlement with the state of a man who earlier this year was awarded the deeds to city hall and 220 acres of land to settle a court judgment.

Walter Debow won a $4 million judgment against the city after he suffered brain damage resulting from a beating by another inmate in the city jail. Mr. Debow's estate was awarded city hall and the land it sits on after a judge ruled that the revenue bonds the city issued to pay the judgment were only worth $2.8 million. The property made up the $1.2 million difference.

The city has appealed that decision. The deeds to the property have been transferred by Mr. Debow's estate into a secret land trust, and up to this time no one has tried to collect rent from the city government for using city hall, said Daphne Wright, an aide to the mayor.

Mr. Bush declined to comment on a letter the city received from the Internal Revenue Service threatening -- unless the city rebates arbitrage profits -- to tax bondholders of a $474 million tax-exempt issue sold in 1985. The borrowing, which was to fund a riverfront development project that was never built, was put together by Matthews & Wright. The firm and its former executive vice president, Arthur Abba Goldberg, pleaded guilty earlier this year to federal fraud and conspiracy charges stemming from the deal.

A more long-term project is a possible charge in the way the city levies property taxes. Mr. Bush said city officials and researchers from the University of Illinois are developing a plan in which the city would tax only land itself, and not the buildings on the land.

Mr. Bush explained that the land-value system could encourage development of the hundreds of vacant lots inthe city, since tax assessments would not increase with the addition of buildings. He said it also could encourage other property owners to upgrade their property.

"We're looking to see if it is feasible," Mr. Bush said. "If it is, we would present it to the voters in a referendum for approval."

He added that long-term prospects for the city are pegged on developing the city's Mississippi river front.

A key to that would be a gambling boat being located on the river front. The city is guaranteed a gambling boat under Illinois' river boat gambling law passed last year if a suitable operator can be found. However, the Illinois Racing and Gaming Commission earlier this year turned down the application of a Louisiana man for previous questionable business dealings.

That ruling is being appealed, and Mr. Bush said it could take a year for a final decision to be made.

"We don't want to wait that long," he added. "We have another potential operator who would like to locate a boat here, and our estimates are tax revenues to us from a gambling boat could be about $3 million a year."

The city's general fund budget is now $6 million.

Mr. Bush, formerly an East St. Louis city commissioner and treasurer, was most recently a member of the St. Clair County Board of Review, a tax appeal panel.

The new mayor said he was working 20-hour days during his first couple of weeks in office, but has since cut his workday back to about 16 hours. Although the hours are long, he claimed he was enjoying the work and felt progress was being made.

"We expect things will get better or we wouldn't be doing this," he said. "There's a real excitement and enthusiasm here now."

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