Compton's financial crisis continues to worsen despite layoffs and service cuts, and the city has already laid off about 15 percent of its workforce.
The city's condition has only been exacerbated by the $369,000 in late fees incurred, because the Los Angeles County city couldn't pay the Sheriff's Department for police services.
The Los Angeles Times says a looming deficit of $39 million, about 80 percent of Compton's general fund budget, likely means more service cuts and layoffs.
Standard & Poor has lowered the rating of some of Compton's bonds to just above junk status. In September, the city fired its third city manager in five years.
New City Manager Lamont Ewell says years of poor decisions, coupled with the economic downturn, drained surplus reserves and left the city deep in debt.
The Times reports that in the summer of 2007, Compton had $22 million in reserve, more money than many of its neighbors, and had developments for the area in the works.
But over the next few years the bubble deflated and every year the city spent more than it took in by more than $10 million, the Times says.