The financial oversight authority for East St. Louis has approved a plan to restructure the city's $83.4 million of debt.
The April 23 approval by the East St. Louis Financial Advisory Authority lets the city negotiate with its creditors on the elimination of about $55 million of the debt, according to authority officials.
The debt restructuring plan, which was unveiled April 7, was drafted by a task force comprised of both city and authority officials.
Prior to the authority's approval of the plan, the city set the tone for creditor negotiations by reaching a $1.4 million settlement with the Internal Revenue Service over a $14.5 million debt. The IRS contended that East St. Louis must pay $14.5 million in illegal arbitrage profits that it earned on $223.74 million of bonds issued in the 1980s.
After the city eliminates as much debt as it can through negotiation, remaining obligations will be paid with proceeds from $11 million to $15 million of revenue bonds backed by Illinois' moral obligation pledge.
The bonds, which would be issued by the end of the year, probably will have a maturity of at least 20 years, according to authority officials.
Under state law, the Illinois Development Finance Authority would issue the bonds and lend the proceeds to the city. East St. Louis would pay the debt service.
If the city fails to make payments, the financial advisory authority could intercept the city's annual state and income tax revenues.