LOS ANGELES — The Desert Hot Springs, Calif., City Council on Nov. 19 voted unanimously to declare a fiscal emergency, a required first step before declaring Chapter 9 bankruptcy, according to news reports.

The Riverside County resort city of 26,000 near Palm Springs will run out of cash by March, according to a report from Bob Adams, interim city manager.

"With few exceptions, the City of Desert Hot Springs' expenditures have exceeded revenues for several years," Adams said in a staff report. "Currently, the general fund revenues of $13.9 million are not sufficient to cover budgeted expenses of $20.1 million."

Adams had recommended 200 different places to cut expenses at last week's special meeting.

Amy Aguer, the city's interim finance director, had recommended officials declare a state of fiscal emergency in a report posted on the city's website two weeks ago.

The city currently has a projected deficit of $3.07 million if it exhausts reserves, according to the city's financial documents.

"If significant action is not taken, the projected depletion of the city's reserves to meet the city's financial obligations would cause the city to file bankruptcy," Adams said in the staff report.

If the city files for bankruptcy, it would be the city's second trip to bankruptcy court. It filed for Chapter 9 bankruptcy in 2001 after losing a legal judgment involving a mobile home park developer. It exited bankruptcy in 2004.

A new filing could endanger the debt it sold to get out of that bankruptcy. The city has $18 million in debt comprised of $8 million in certificates of participation and $10 million in bonds issued to repay the judgment that forced the city into bankruptcy in 2001.

 

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