First there was Stockton, then San Bernardino that were circling the economic drain hole. Now welcome Desert Hot Springs as the newest California member to stare city bankruptcy in the face. It is not a pretty visage, sunken eyes, leering expression, eeeyyyyuuuu!
Detroit, the largest U.S. city to file for bankruptcy protection, along with San Bernardino will probably be the ones that will decide precedence as to wether bondholders or retirees will take it in the shorts when a city goes belly up. To think the bond holders were told municipal bonds were guaranteed.
Desert Hot Springs financial difficulties were exposed when a new director of finance turned up a $3 million deficit in a $13.5 million budget. The new interim finance director said she had no details but concluded it was the consequence of unanticipated pension and salary costs and an overly confident expectation of future revenues.
Dang those overly optimistic income forecasts. It seems to happen so often. Do you think some one just accidently put a few extra zeros on the forecast or is something more sinister/stupid going on here?
“What is happening in Desert Hot Springs, and San Bernardino, are not going to be highly unusual events,” Karol Denniston, a bankruptcy attorney, noted, adding that the California Public Employees’ Retirement System (Calpers). “Keeps increasing costs and many of these cities have cut costs down to where there is nothing else left to cut.”
“It’s obvious we can’t continue with salaries and pensions that are in the stratosphere, no matter how much love there is for our police department,” lamented council member Russell Betts.
In a previous report an outside consultant indicated that Desert Hot Springs pension costs were perilously high. Soaring pension costs in Detroit and Stockton and San Bernardino have caused city managers to ask for a judge’s permission to cut pension benefits.
California is not alone in its financial woes, with the worst credit rating of all 50 states, Illinois lays claim to a $100 billion unfunded pension liability.
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