A major California resort town is threatening to enter bankruptcy due to salary and pension costs.
Desert Hot Springs, California, a city of 26,000 east of Los Angeles, could be the third major city to file for bankruptcy after San Bernardino and Stockton.
The city’s problems came to light last week when a new finance director discovered a $3 million shortfall in the city’s $13.5 million budget during a routine record check. The interim director of finance could not explain the reason for the shortfall but said it was likely due to higher than expected pension and salary costs.
If the city ends up filing, it will be the second time since 2001 that the city has filed for bankruptcy proection.
Amy Aguer, the city’s interim director of finance, said that 70 percent of the budget was consumed by police costs between salaries and pension payments.
A federal judge has issued a ruling saying the city of Stockton, California would be unable to offer basic government services without bankruptcy protection.
California cities are increasingly considering filing for bankruptcy or even folding after San Bernardino became the third California city in the last month to seek bankruptcy protection. Multiple cities have been slashing budgets and employee salaries in an attempt to reign in debts.