Desert city finances not so hot

Desert Hot Springs, California, a resort near Palm Springs, may become the first US city since Detroit to seek bankruptcy protection from creditors after a sharp drop in revenue.

Desert Hot Springs, California, a resort near Palm Springs, may become the first US city since Detroit to seek bankruptcy protection from creditors after a sharp drop in revenue.

The city of 26,000 people will run out of cash by March 31, according to a memo to the city's council from interim director of finance and administration Amy Aguer. She urged the council to declare a fiscal emergency.

If this action is approved, Desert Hot Springs would join two other Californian cities in the bankruptcy court: San Bernardino, with a population of 210,000, and Stockton, with 292,000 residents.

"I'm just blindsided," mayor Yvonne Parks said when asked about the fiscal crisis. "There isn't anything that could explain this. That's what blows my mind."

Revenue for this financial year is projected to be $US13.9 million ($14.8 million), or $US2.7 million less than budgeted, Ms Aguer said in the memo.

San Bernardino, whose council voted for bankruptcy in August 2012, and Stockton, which filed in June 2012, both cited decreased property-tax revenues from the housing-market collapse, as well as rising labour and pension costs.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles