California resort town Desert Hot Springs said on Tuesday that it could join other US cities that have recently sought for bankruptcy protection. It would run out of cash by March due to sky-high salaries and pension costs.
According to Reuters, Desert Hot Spring's possible bankruptcy filing would make it the third California city to seek court protection since 2012. Over a year ago, San Bernardino and Stockton filed for bankruptcy protection from its creditors.
Desert Hot Springs is a Riverside County city of 26,000 people about 110 miles east of Los Angeles.
The resort town was expecting a USD14 million revenue for the current fiscal year, Arizona news daily Mohave Valley said. Yet Desert Hot Springs projects USD20 million in spending, a USD6 million shortfall, it added.
Desert Hot Springs officials said that the budget shortfall was a result of higher-than-expected pension and salary costs and an overly optimistic estimate of revenue.
About 70% of the city's budget was consumed by police costs, most of which were spent on salaries and pension payments to the California Public Employees' Retirement System (CALPERS), Reuters said.
CALPERS is the largest public pension fund in the US, with USD277 billion assets under management.
Desert Hot Springs first declared bankruptcy in 2011 after facing a USD9 million legal judgement and emerged from protection in 2004, Mohave Valley said.
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