IPFS News Link • Economy - Economics USA
Another U.S. city mulls bankruptcy due to soaring wages and pensions
• http://ca.news.yahoo.com, By Tim ReidSan Bernardino and Detroit - the biggest U.S. city to seek Chapter 9 protection - are likely to set precedent on whether retirees or Wall Street bondholders suffer the most when a city goes broke.
The problems in Desert Hot Springs came to light last week when a new finance director reviewed the city's records and discovered a $3 million shortfall in its budget of $13.5 million. Amy Aguer, the interim director of finance, did not have details on how the shortfall occurred but said it was the result of higher-than-expected pension and salary costs, especially in the police department, and overly optimistic estimates of revenue.