Straight Outta’ Money: Will Compton Be the Fourth Calif. City to Go Bankrupt in 2012?
Compton, Calif., has until September 1st to decide whether it will become the fourth city in the Golden State to declare or consider bankruptcy this year, according to two city officials.
“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. “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.”
And this shouldn’t come as a surprise. The city’s finances have been a mess for a while now.
“The municipality has accumulated a $43 million deficit with no reserve. Funding for the city is expected to run out by the beginning of September,” CBS Los Angeles reports.
“The Council added to Compton’s accumulated deficit on July 10 when it adopted a $161 million budget with a $9 million projected deficit,” the report adds.
Compton’s financial predicament was further exacerbated on July 13 when credit rating agency Standard & Poor’s said it may cut the city’s “BB” long-term ratings for its “lease revenue bonds.”
“S&P cited a decision by Mayer Hoffman McCann, the city’s independent auditors, to resign rather than sign off on Compton’s 2011 financial statement,” Reuters reports.
The council meeting broke up without any further discussion of filing for bankruptcy.
Watch the CBS update:
“If filed, Compton would be the fourth California city to declare or consider bankruptcy,” CBS adds. “San Bernardino, Stockton and Mammoth Lakes have all announced this year that they would seek restructuring of their liabilities.”
This story has been updated.
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