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The mayor and city treasurer of the western Negev city of Sderot say their town is tottering on the brink of bankruptcy.

Treasurer Shimon Peretz says that the cumulative deficit of the municipality stands at NIS 28 million.

Mayor David Buskila and Peretz claim that the deficit is the result of the cessation in the flow of charitable donations to the municipality, which which ceased with the flow of thousands of Qassam rockets which rained down from nearby Gaza for years. The rockets have mostly stopped since Operation Cast Lead over a year ago.

The global economic crisis has also resulted in a significant drop in the support provided to various institutions in the city.

Peretz warns that the collapse of the city will occur in the coming months "unless a miracle happens."

Wages to city employees are regularly delayed, the assistance from the Finance Ministry was cut by more than NIS 10 million, and some employees are being laid off because of a stringent rehabilitation program instituted by the Interior Ministry.

During the past decade, Sderot benefited from donations to the tune of nearly NIS 25 million per year. Much of the aid came from Jewish communities throughout the world, organizations and large companies in Israel, and the Jewish Agency.

However, following Israel's Gaza offensive the assistance dropped dramatically and municipal officials cannot count on anything beyond five figures.

"The situation in the city was bad because of the Qassams," Peretz said. "For eight years every one contributed to the city ... They invested hundreds of millions of shekels. Now we can barely receive any assistance. We are on the verge of total collapse."

Meanwhile 10 city employees were laid off and 90 more will soon follow. "We will not be able to manage economically, and then the government ministries will blame it on faulty management."