CATHEDRAL CITY, Calif. -

The financial woes of Desert Hot Springs could be worse than expected with the city facing a multi-million dollar budget deficit.
Leaders there may be able to look at Cathedral City as an example.        

Cathedral City Mayor Kathy DeRosa gave a more hopeful state of the city address this year. She expressed how Cathedral City's budget picture is starting to improve after hitting a crisis in July of 2012.

"We are significantly leaner but the unity of our employees and community are more resolved than ever to make Cathedral City a great place to do business and to live," said DeRosa.

She made it clear the city has sacrificed quite a bit over the past year, but there are improvements. The good news comes after the city adopted a two-year balanced budget plan. DeRosa said tough decisions were made to help Cathedral City crawl out of an $8 million budget hole.

Sacrifices included cuts to 61 employees, including police officers, firefighters and non-public safety workers.

"There's only so much cutting you do and then it gets to the point that it's not about cutting anymore it's about revenue," said DeRosa.

With a 30-percent reduced staff, the city is trying to attract new businesses and ecnourage residents to shop local.

"Every city is suffering from one degree or more," said James Price, of Cathedral City.

Scrambling to avoid bankruptcy, Desert Hot Springs interim city manager, Robert Adams estimates a budget deficit between $4 million to $7 million dollars. Public safety could be on the chopping to block to help fill that gap.

"Laying off an employee is the hardest thing to do. It is gut-wrenching," said DeRosa.

To help put the economic challenges behind them, Derosa recommends that Desert Hot Springs leaders listen to community suggestions and "Set the right policy. Keep the course going and stay true to yourselves," said De Rosa.

Cathedral City is not in the clear yet, but the council told us it's trying to come up with a 5-year plan to continue working smarter, being more cost-effective and moving forward.