Another US city mulls bankruptcy

Desert Hot Springs is running out of money by March 31.

Desert Hot Springs, a city located 110 miles east of Los Angles, California, warned Tuesday that it is running out of money by March 31 due to burdensome salary and pension costs.

It is the third city in the state along with San Bernardino and Stockton to seek court protection from creditors, Reuters reported.

The financial problems in Desert Hot Springs came to light last week when interim finance director, Amy Aguer, reviewed the city’s records and discovered a $3.3 million shortfall in its budget of $13.5 million, the report said.

Aguer said the budget deficit was the result of higher-than-expected pension and salary costs, especially in the police department. Some 70 percent of the city�™s budget was consumed by the department, he said.

“It’s obvious we can’t continue with salaries and pensions that are in the stratosphere, no matter how much love there is for our police department,” said Russell Betts, a council member.

Desert Hot Spring declared bankruptcy in 2001 after losing a multimillion dollar lawsuit and still servicing $9.7 million of bond debt issued to fund its exit from Chapter 9 bankruptcy.

An outside consultant’s report earlier this year warned the city that its pension costs were too high, according to the report.

Detroit in Michigan and Stockton and San Bernardino in California have struggled to meet their rising pension obligations.

Illinois has also a $100 billion unfunded pension liability that has resulted in credit downgrades having left the state with the lowest ratings among US states.

With the second round of across-the-board spending cuts being on the way, the United States is facing serious economic problems this fiscal year, according to a recent report by the Associated Press.

The first round of automatic cuts that took effect last year expired Sept. 30, damaging the national economy to some extent, but this year the new round of cuts may force federal agencies to furlough many of their employees.

The current US budget deficit is $680 billion.


Source: Press TV