Compton poised to become next bankrupt US city

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Compton, California, a city just outside of Los Angeles,  may be the third city in the state to file bankruptcy. The city, which has become an iconic symbol of black inner-city life thanks to the music of West Coast hip-hop acts like NWA, is facing a $43 million deficit, and high-ranking city officials, including Mayor Eric J. Perrodin, are alleging corruption and mishandling of funds. The city began having  financial problems when it began to spend beyond legally set limits. City officials have stated that the city only has $3 million on hand and disbursements of $5 million due within the next ten to twelve days.

Reuters reports Doug Sanders the city treasurer told the city council during a July 17 meeting that within a few days the city would be forced to default on bond payments.

Grio contributor Caryn Freeman discusses this story on WHCB-AM’s ‘Inside Detroit’: 

“I have $3 million in the bank and $5 million in warrants due in the next 10 to 12 days,” Sanders said, “by then, the council will have a decision to make: don’t pay the bonds, default on them, or have a serious talk about bankruptcy.”

California cities San Bernardino and Stockton have recently been forced into bankruptcy, largely due to foreclosures and the loss of millions of dollars of property tax revenue that was once collected by the city before the mortgage crisis.

Compton’s problems intensified last week when Standard and Poor’s made the decision to cut ratings for lease revenue bonds. S&P made the decision after two city officials refused to sign off on the city’s 2011 financial statement.

To further complicate things for the struggling city, no other auditing firm is willing to step in, making it nearly impossible for the city to acquire a short-term line of credit that would help the city cover expenses in the coming days.

Follow Caryn Freeman on Twitter.