Three have gone into bankruptcy, but others may still be in danger. As the economy continues its slow recovery, local governments face depressed tax revenues and returns on investments continue to leave cities on the hook for additional pension contributions.

The two factors have placed cities and other governments across the state at risk for bankruptcy. However, it doesn’t mean that there will be a mass flight to Chapter 9. Cities are working out solutions to their budget constraints that vary from employee concessions to reorganizations to increasing revenues from other sources – such as fees and modified taxes.

Cities like Glendale and Lancaster have cut their staffing levels while reorganizing their governmental structure. Lancaster even auctioned off computers and other spare equipment to try to minimize drawing from their reserve account. Unfortunately, payments made from the Successor Agency to the state necessitated a reserve transfer.

A grand jury found that numerous cities in Los Angeles County face the threat of insolvency for not carrying a 2-to-1 ratio of assets to liabilities.

From the Los Angeles Daily News:

Don’t be surprised if more California cities go belly up.

Certainly a number of experts around the state won’t be. The pressures that pounded San Bernardino, Stockton and Mammoth Lakes into bankruptcy mode aren’t much different from those threatening other cities around the state: stagnating tax revenue, spiraling pension obligations and decreased financial support from the state, among others.

“It seems inevitable that there will be more bankruptcies,” said economist Ed Leamer, director of the UCLA Anderson Forecast, which studies the regional and national economies.

Read the full article here.