Desert Hot Springs, California, Mulls Bankruptcy Step

The City Council in Desert Hot Springs, California, stopped short of declaring a fiscal emergency despite a warning that it may run out of cash in four months. City officials kept the option open.

The resort town of 26,000 people and 16 boutique mineral spas will run out of cash by March 31, according to a memo to the council from Amy Aguer, the interim director of finance and administration. She recommended declaring the emergency, a step required under California law if the city decides to seek court protection from creditors.

A bankruptcy decision by Desert Hot Springs, near Palm Springs, about 110 miles (180 kilometers) east of Los Angeles, would make it the third in California, joining San Bernardino, with a population of 210,000, and Stockton, with 292,000 residents, the biggest U.S. city to enter Chapter 9 proceedings until Detroit sought protection in July.

While the council took no action today, it may consider such a move at its next meeting on Nov. 19, said Robert Adams, the interim city manager.

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