LOS ANGELES — Desert Hot Springs, Calif. officials avoided taking steps that would lead to its second Chapter 9 bankruptcy during a special meeting held Tuesday night to discuss the city’s latest fiscal crisis, but the city’s not out of the woods.
The Riverside County resort city of 26,000 near Palm Springs will run out of cash by March, according to Amy Aguer, interim finance director.
Aguer recommended in a report posted on the city’s website last week that city officials declare a state of fiscal emergency, a required step before the city enters municipal bankruptcy.
Council members didn’t vote at Tuesday night’s meeting, broadcast via the city’s website, but appeared to favor developing budget cuts without declaring an emergency.
“As you know, we’ve had a deficit budget for a number of years that we have been balancing with reserves,” interim City Manager Robert Adams said during the council meeting. “If we continue at this pace, we may be out of money by the end of the year.”
The city currently has a projected deficit of $3.07 million if it exhausts reserves, according to the city’s financial documents.
The city wouldn’t need directions to the 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.
Council members agreed to make a decision about necessary cuts by the Nov. 19 or Dec. 3 meeting. Council members were given 200 possible areas to cut in a report from staff including reducing consultant contracts by 10%.
“It’s time for this city hall to get lean and for cuts to be made,” Councilmember Russell Betts said during the meeting.