With fewer than 24 hours remaining before it becomes the first city since the depression to default on its debts, the city of Clevelandtoday failed to come up with a solution to its fiscal crisis.
The citycouncil, which had scheduled a meeting today to discuss a solution, didnot meet. Mayor Dennis J. Kucinich, who is ultimately responsible for avoiding the default, wandered city hall corridors this morning in a vain search for members of the council and discussed the unrelated matter of a concession contract for the Cleveland airport this afternoon.
Closed-door negotiations with the Cleveland banks owed $15.5 million by place. The only concrete news was that one band rejected the mayor's prosposal to prevent default and would not extend its loan to the city.
Much of the closed-door talk, soursed said, centered on whether the city wouldsell the municipally owned light plant-called Muny Light-to help raise money and rid itself of a source of debt. The plant produces no power; it purchased it from the privately owned Cleveland Electric IlluminatingCo.
Kucinich, who has made his refusal to sell the plant the major plank in his fighy against "monopoly" interests, said today that he was still opposed to selling it, comparing such a sale with "selling my soul tothe devil."
Many of the council members want the mayor to sell the plant before they will agree to the tax increase referendum he has proposed. Many of the bankers also favor its sale. They believe it would be the sole guarantee of new income to the city since the 50 percent tax increase is dependent on voter approval.
"I really can't tell you where things stand," Council President George Forbes told reporters late today. "Everybody seems to be waiting on everyone else." Asked what he had heard this morning about progress in averting default, Kucinich replied; "Nothing."
The bnak that rejected the Kucinich proposal reportedly is the Cleveland Trust Co., which holds$5 million of the city's short-term notes due on Friday. It is the largest note-holder of the five banks involved.
The Cleveland Plain Dealerin a story slated for publication in Friday editions reported that Cleveland Trust and informed the city late today that it would present its notes for repayment Friday and that the mayor's plan was unacceptable to the bank.
Should Cleveland Trust's rejection stand, it would mean that Cleveland would default on at least a third of the money it owes.
Cleveland Trust officials would not comment publicly today. But Forbes confirmed that, "Even if the mayor's plan passed the council, it won't solve the problem because the plan is not acceptable to all the banks." Forbes, who would not name the hold-out bank, said the council would meet Friday to discuss the situation.
Sources said that in addition to the saleof Muny Light, some of the bankers desire much stronger outside controls over the city's tangled fiscal operation than those proposed by Kucinich.
Meanwhile, federal officials said they do not expect Cleveland to be forced into default on the bonds. "Our best information," said one financial official, "is that the city council will vote to approve an income-tax referendum" at its meeting Friday.
Should the council approve the referendum, they felt, Cleveland Trust probably would be forced to join the four other banks that have said they will refinance the bonds if there is a referendum.
Even if the city defaults, the impact on municipal securities elsewhere should be negilgible, federal officials and financial experts say.
"The market has known of Cleveland's troubles for sometime and has thoroughly discounted it," said one expert. CAPTION: Picture, Mayor Kucinich wandered City Hall seeking City Council that refused to convene. AP