Another California City Contemplates Bankruptcy

Will a resort town in California be the next Detroit?

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A small California city said Tuesday that it will run out of money in March and that it is considering filing for bankruptcy.

The government of Desert Hot Springs, Calif., blamed high salary and pension costs, Reuters reports. If the resort city of 26,000 people does declare bankruptcy, it will be the third in California to do so, following San Bernardino and Stockton.

When a new finance director took a look at the city’s records last week, she discovered a $3 million shortfall in a $13.5 million budget, Reuters reports. Nearly 70 percent of of the city’s budget was consumed by police costs. An outside consultant’s report from earlier this year said that Desert Hot Springs’ pension costs are far too high.

Detroit, Stockton and San Bernardino have all had a hard time meeting their rising pension obligations. A state-appointed emergency manager in Detroit, which became the largest U.S. city ever to file for bankruptcy, is hoping that a judge will allow the city to slash pension benefits.

[Yahoo News]


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