Compton’s treasurer informed the city council Tuesday that he did not have enough cash on hand to make payments on city bonds. The city is currently $42 million in debt and the LA Times reports that Compton has “consistently fallen behind on payments to vendors, including its sheriff’s contract.”
It’s expected that Compton will no longer be able to make payroll for city employees on September 1st. If the city decides to file for bankruptcy it would have to do so by that date. A decline in tax revenue related to the economic crisis is blamed for the city’s predicament, but there are also rumors of other problems.
Last week the city’s independent auditor quit and refused to certify Compton’s books. This is apparently due to possible fraud though the details remain sketchy. Reuters reports unspecified allegations that the city “overspent legally set limits on certain programs by $17 million.”
Compton is the fourth California city to openly consider bankruptcy. Stockton, Mammoth Lakes, and San Bernardino have all been reported to be considering it already.