UPDATE: City leaders in Desert Hot Springs voted unanimously Tuesday night to declare a fiscal emergency in order to avoid their second bankruptcy in just over a decade. According to a report prepared by Interim City Manager Robert Adams, the city is facing a $6 million shortfall and is expected to deplete its reserves within five months. Read more at the Los Angeles Times.

Thanks to an “unexpected” $3.07 million shortfall, the City of Desert Hot Springs may soon join the likes of Vallejo, Stockton, Mammoth Lakes and San Bernardino by declaring municipal bankruptcy.

In a memo last week, Director of Finance and Administration Amy Aguer urged the council to declare fiscal emergency in order to fulfill the prerequisite in filing for Chapter 9 bankruptcy.

“This makes it necessary to make difficult decisions quickly in order to turn around the financial condition of the City,” stated Aguer in the memo. “The City will need to take steps to declare a Fiscal Emergency very soon.”

The Desert Sun reports that Mayor Yvonne Parks was “blindsided” by the news.

“There’s a whole bunch of stuff in there that I question,” Mayor Yvonne Parks said to The Desert Sun. “I want a total explanation of why you can go from a $4.1 million reserve and in six months you have a fiscal crisis, a fiscal emergency, a potential for bankruptcy. What happened? I don’t get it.”

According to City Manager Bob Adams, city leaders discussed the financial issues with the council in early October.

Not all city officials are surprised, however.

“We had an urban futures report that was released back in May,” Betts said in the same interview with the Sun. “We have had this information, and we covered it in several finance meetings. This wild spending has been talked about for two years now.”

According to Betts, part of the problem lies in the fact that Desert Hot Springs has 15 employees with compensation packages valued over $200,000.

It has been nearly four months since Detroit became the largest city in the United States to file for bankruptcy. If city leaders in Desert Hot Springs decide to pursue Chapter 9 bankruptcy protection, it would make the Riverside County city the first to do since Detroit.

“I think the next six months are going to be really interesting around here,” stated Councilman Betts at a November 5 city council meeting. “There are some very, very tough budget times coming, and this city needs to be aware of it, the public needs to be aware of it. So get ready: it’s coming.”

This is not the first time Desert Hot Springs has declared bankruptcy. The city filed for Chapter 9 protection after it lost a legal settlement in 2001.

A special City Council meeting to discuss the budget issues will be held on Tuesday, November 12.

Read the full article at Bloomberg.

View Aguer’s financial report to the Desert Hot Springs City Council below: