East St. Louis must redo budget after overseer faults projections.

CHICAGO - East St. Louis, Ill., has two weeks to submit a revised fiscal 1994 budget after a financial oversight authority rejected the city's proposed $24 million budget.

R. Bruce Patterson, the executive director of the East St. Louis Financial Advisory Authority, said the troubled city was directed to revise the budget because of inadequate expenditure and revenue projections. The city's 1994 fiscal year begins on Jan. 1.

On the expenditure side, the city did not include an allocation for projected debt service related to the implementation of an anticipated debt restructuring plan in fiscal 1994, Patterson said. Authority and city officials have said they hope the plan can be implemented by next summer.

The city is working on a plan that would need authority approval to restructure $79 million of debt, including $25.5 million of outstanding unrated bonds, according to authority officials. The plan is expected to include the issuance of about $30 million of bonds by the Illinois Development Finance Authority, which acts as a conduit issuer on behalf of Illinois municipalities.

Patterson said the city's budget also did not include a $736,000 payment to the state to help pay off a $3.75 million loan given in 1991, a $236,000 payment on a bank loan that financed new fire trucks, or payments for unpaid fiscal 1993 bills.

Patterson said that the financial advisory authority generally "likes the [city's] revenue projections" in the city's proposed budget. However, he said that some revenue estimates need revision.

He said that the five-member authority would like the city to reduce its estimate of annual revenues from a six-month-old riverboat gambling casino to $5.4 million from $6 million because of an anticipated slowdown in gambling during the winter.

In addition, the authority requested that the city lower its projections for state income tax surcharge revenues, to $180,000 from $300,000, to reflect estimates calculated by the Illinois Bureau of the Budget.

Patterson said that the city's budget is also missing fiscal 1993 "carryover" revenues from community development block grants and tax increment financing districts that can be used in fiscal 1994.

East St. Louis officials did not return phone calls.

Under a state law that created the authority, the authority must approve the city's budget for the new fiscal year. Otherwise, the authority could intercept all state proceeds, including sales and income taxes to the city, to help pay off the $3.75 million loan from the state.

The authority, which was created by the Illinois General Assembly in 1990, must approve all East St. Louis budgets, financial plans, and contracts.

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.

Last year, the authority imposed a $19.3 million budget on East St. Louis because city officials failed to submit a fiscally sound budget in a timely manner. The authority also required the city to hire an independent accounting firm to help it manage its finances.

East St. Louis, which has the highest property taxes in the state, has experienced numerous financial setbacks in the last decade, including a $474 million bond scandal in 1985. During the period, the city's 40,000 residents often did not have adequate garbage collection services or police and fire protection.

Mayor Gordon Bush. who was elected in 1991, has said he hopes that the new riverboat casino on the Mississippi River will help the city make a long-awaited comeback.

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