CHICAGO - East St. Louis, Ill., officials last week said they will accept a $19.3 million fiscal 1993 budget drafted by the city's financial oversight authority in response to inadequate fiscal management.
The city is expected to notify the East St. Louis Financial Advisory Authority today of its acceptance and will submit a few amendments to the budget for the fiscal year that begins Jan. 1, according to City Manager Ishaq Shafiq.
Under a state law that created the oversight authority, the city has until Dec. 30 to accept the authority's budget. Otherwise, the authority could intercept all state proceeds, including sales and income taxes to the city, to pay off $3.75 million the state lent to the city in 1991, according to authority officials.
That law also requires the authority to approve or reject all of the city's budgets, financial plans, and contracts.
Shafiq, who was named city manager in October, said the city would accept the authority's budget because it needs to seriously address its fiscal management problems. He said that fighting the authority and insisting on approval of the city's version of the budget would not be in the best interests of the city's 45,000 residents.
"We cannot create an atmosphere that is adversarial. There are problems. Let's solve them," Shafiq said.
Shafiq said he was not surprised at the authority's action and said he was "delighted" to work with the authority on solving East St. Louis' problems.
Prior to his appointment as city manager, Shafiq said, the city did not consistently perform basic accounting tasks, such as recording the issuance of checks. Former City Manager Ellis Mitchell was fired in October because of his fiscal incompetence, among other things.
Last Tuesday, the five-member authority voted to impose a $19.3 million budget on East St. Louis, based on the city's failure to keep accurate records and to submit them in a timely manner.
Ronald Bean, a member of the authority, said Friday that the city's decision to accept the authority's budget was a "positive sign." He added that the authority is willing to accept "reasonable" amendments to the budget.
Bean said the authority's budget is fair and provides funding for essential city services. He pointed out that the budget does not call for an increase in taxes.
In addition to imposing a budget on the city, the authority last week voted to issue a request for proposals for an accounting firm to work with the city on managing its financial matters.
"I welcome the continued technical assistance from the authority," Shafiq said, noting that the city's version of the budget includes funds to employ a financial management team. He added that he will request that the authority's budget include the hiring of one or two city accountants to work with the accounting firm.
The financial oversight board was authorized by the Financially Distressed Cities Act, which was passed by the Illinois General Assembly in 1990. The law set up a general framework for rescuing troubled cities but was drafted specifically with East St. Louis in mind.
According to the law, the authority will be dissolved only if the city prepares and operates under balanced budgets and meets other conditions for 10 years.
The city and authority are working on a plan to restructure the city's $30 million to $40 million of outstanding debt. After the plan is completed, the authority will ask the Illinois Development Finance Authority to issue $30 million of bonds and then lend the proceeds to the city.
Those proceeds would be used to help pay off the city's long-term debt, according to oversight authority officials. The plan could be completed by mid-1993.