As part of a growing trend, Compton California is on the verge of bankruptcy. When it files (and it will eventually), it will become California’s 4th city to do so.
The Huffington Post reports Compton Will Run Out Of Funds By September 1
At a city council meeting Tuesday, officials announced that Compton is set to run out of funds by Sept. 1. Compton, which has only 93,000 residents, faces a deficit of $43 million after having depleted a $22 million reserve, reports Reuters.
“I have $3 million in the bank and $5 million in warrants due in the next 10 to 12 days,” said city treasurer Doug Sanders during the live-streamed city council meeting. “By then, the council will have a decision to make: don’t pay the bonds, default on them, or have a serious talk about bankruptcy.”
What’s to Consider?
Compton is clearly broke so there is noting to consider. The LA Times has more grim details in Compton on brink of bankruptcy.
City officials announced that Compton could run out of money by summer’s end, with $3 million in the bank and more than $5 million in bills due…
In many cases cities resorted to these measures because they could not balance their books or raise revenues but were loath to make cuts.
A recent grand jury report found that the High Desert city of Victorville used a series of disparate, possibly illegal measures to stave off insolvency. Those included dipping into sanitation funds to help keep the city’s treasury afloat, loaning water agency funds to bail out the city’s electric utility and siphoning $2 million in airport bond funds to buy land for a city library.
The inter-agency borrowing was so questionable — with $69 million sloshing around City Hall as of June 2011 — that the Securities and Exchange Commission launched an investigation, which is ongoing.
In Montebello, state auditors last year said they were troubled to learn that the city regularly used money designed for specific purposes to balance its budget — in apparent violation of the law.
Victorville, Montebello, Los Angeles, Oakland
It’s a safe bet to add Montebello and Victorville to the list. Moreover, some of the big guns will eventually go under as well.
Unsound pension problems will be the death of many cities. I consider Oakland and LA to be sure things. It’s just a matter of time.
Delays in filing will only waste more taxpayer money. Eventually cities will catch on and there will be a flood of bankruptcies.
S&P Revises Pennsylvania’s Outlook to Negative
Citing pension problems and a slowing economy, S&P Revises Pennsylvania’s Outlook to Negative
Standard & Poor’s Ratings Services changed its outlook to ‘negative’ from ‘stable’ for Pennsylvania’s general obligation debt because of growing spending pressures, particularly for public pensions, and a slow-growing state economy, the agency said on Thursday.
S&P affirmed the ‘AA’ credit rating on the state’s general-obligation debt, but said it could lower that rating a notch in the next two years if Pennsylvania does not enact pension reform.
Mike “Mish” Shedlock
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