SAN BERNARDINO (CBS/AP) — The city of San Bernardino has declared a fiscal emergency to avoid a lengthy mediation process and head straight to federal bankruptcy court.

The City Council voted 5-2 on Wednesday to declare the emergency and file for Chapter 9 bankruptcy protection amid a dire cash crunch that has officials worried San Bernardino can’t meet payroll in August.

Each pay period cost the city about $4.5 million, reported CBS 2 and KCAL9 reporter Jeff Nguyen. San Bernardino has $9 million in the bank and could run out of money before the middle of next month.

The vote, which the council delayed acting on Monday, could make the city of 210,000 people the third in California to seek bankruptcy protection since last month, following Stockton and Mammoth Lakes.

The city is facing a $45.8 million budget shortfall this year.

Gwendolyn Waters, a spokeswoman for the city manager’s office, says the announcement of the bankruptcy plan has further stressed San Bernardino’s finances by prompting a dozen employees to retire and vendors to demand cash instead of credit.

Elsewhere last night, the city of Compton held a four-hour meeting in which two senior financial officials told council members they have to decide whether to file for bankruptcy by Sept. 1. That municipality has accumulated a $43 million deficit with no reserve. Funding for Compton is expected to run out by the beginning of September.

(TM and © Copyright 2012 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2012 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)


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