Compton Edges Close to Bankruptcy as San Bernardino Speeds Ahead

Thursday, July 19, 2012

The city of Compton in Los Angeles County says it will run out of cash September 1, becoming the fourth California municipality to join the bankruptcy conversation.

San Bernardino, which voted its intention last week to file for Chapter 11 protection, declared a fiscal emergency Wednesday, clearing the way for it to skip months of mediation otherwise required by the state and speed toward bankruptcy. San Bernardino is the first city to take advantage of the speedy bankruptcy loophole.

Like San Bernardino, Compton has a home foreclosure crisis and is running a large budget deficit. Its unemployment is worse. It ran through a $22 million reserve on the way to a $43 million deficit. The city treasurer says the council will have to decide about bankruptcy in 10 to 12 days.

Credit rating agency Standard & Poor’s told the city on July 13 that it was considering a ratings cut for its bonds. S&P said it was heavily influenced by the decision of the city’s independent auditor to resign rather than sign Compton’s 2011 financial statement.

According to the city controller, S&P gave Compton 90 days to come up with certified audited financial statements or its $70 million in bonds could lose their ratings entirely.

–Ken Broder


To Learn More:

Compton Bankruptcy? CA City Announces That It Will Run Out Of Funds By Sept. 1 (by  Anna Almendrala, Huffington Post)

Compton on Brink of Bankruptcy (by Abby Sewell and Jessica Garrison, Los Angeles Times)

San Bernardino Declares Fiscal Emergency Ahead of Bankruptcy Filing (by Phil Willon, Los Angeles Times)

San Bernardino, California, Sets Course for Bankruptcy (by Tori Richards and Jim Christie, Reuters)

City of Compton May Declare Bankruptcy by September—Officials (by Ronald Grover and Jim Christie, Reuters)

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