UPDATE / EAST ST. LOUIS : Illinois Bails Out Troubled City Close to Bankruptcy : No one thinks the town’s problems can be solved with $34 million. But the plan might increase investors’ confidence.

They call it a bailout, but nobody believes that Illinois Gov. James R. Thompson’s $34-million plan to aid beleaguered East St. Louis will really solve the city’s problems.

“I say this is a 10% solution,” said Thomas Berkshire, an aide to the governor who helped draft the plan, “but I couldn’t tell you what the other 90% is.”

The city, across the Mississippi River from St. Louis, has tottered perpetually on the brink of bankruptcy in recent years. With revenues of only $5 million, the city of 57,000 is $47 million in debt. It is constantly late in meeting payrolls. The sewer system is crumbling. And the city has been convicted twice of reckless conduct for sending police officers out in unsafe cars without working radios.

Carl Officer, the flamboyant mayor, was jailed last year because he failed to appear in court to explain why he had ignored a court order to repair sewer leaks that were so pervasive they prompted fears of disease outbreaks.

Speaking of the bailout plan, Daniel Monti, a sociologist at the University of Missouri, St. Louis, said: “This arrangement, or something like it, was all but inevitable.”

The city’s assets have been repeatedly frozen by creditors in recent years. The city’s accounts have been garnisheed so many times and it has opened up so many new ones, Berkshire said, that East St. Louis now has 200 bank accounts and no system to allow officials to know how much money is in them.

Under the bailout plan, a five-member board appointed by the governor “will effectively take control of the city government,” Berkshire said.

The board will appoint a financial manager for the city, appoint a financial advisory panel and approve all city budgets. The board will have at its immediate disposal $4 million in state loans to use for such items as police and fire department equipment and training, sewer improvements and health insurance for city employees.

The additional $30 million in loans will be used to consolidate and restructure the city’s debt.

Although the plan does not guarantee that the city’s financial condition will improve, Monti said it might increase confidence in the city and lead to increased investment.

Officer, charging that there was a racist conspiracy by state officials and white businessmen to seize control of the nearly all-black city for its potentially valuable riverfront property, had long insisted that he would never agree to any bailout that usurped his power.

In a war of words, Thompson last year snapped that the city would receive no helping hand from the state as long as Officer remained mayor.

With the city’s financial condition growing worse, the two officials buried their differences and reached a compromise on the bailout plan. It was passed by the Illinois Legislature on June 30 and is still being reviewed by Thompson, who spent much of last month out of the country.

“He’s reading the language to make sure that nothing was tacked on to it,” Barry Hickman, a spokesman for the governor, said. “He wants to make sure this is an East St. Louis bill and that it does what the governor wants it to do.”

Much of the debate over East St. Louis has been racially tinted, but Monti said the problems existed when it was a white-controlled town and have been exacerbated as the economic base deteriorated. “Black people had the misfortune of being the last ones there to turn out the lights,” he said.

As far back as a century ago, East St. Louis was a repository for things polite St. Louis society did not want around it, said James D. Nowlan, a professor of public policy at Knox College in Galesburg, Ill., who spent five weeks conducting research in the city last summer at the behest of the Thompson Administration.

East St. Louis was the center in the region for “dirty industry,” such as meatpacking, and it was the center of prostitution and gambling, he said. The city has long had a reputation for political corruption, which it still has. Two of Officer’s top aides have been convicted in the last two years of extortion and misconduct.

Officer’s Administration has long pinned rejuvenation hopes on a $473-million waterfront development plan that critics believe will never be built.

Nowlan concluded in his study that, with state help, the city could provide basics such as police and fire protection and garbage pickup. But the idea of injecting new life into the city through ambitious development schemes is “a pipe dream,” he said.

Berkshire noted that a number of lawsuits filed against the city by creditors are still pending, that 60% of its population is on welfare, that its property taxes are the highest in the state, that its crime rate is three times as high as that of St. Louis and that 1,000 residents continue to leave East St. Louis each year.