The district attorney's office says it will look into possible criminal activity while California's attorney general will handle a civil probe.
The city of 40,000, one of the poorest in the county, has been in an uproar since residents learned their city manager earned nearly $800,000 and other leaders were also getting huge paychecks. The city manager and two other officials have resigned.
Meanwhile, the city's bonds were downgraded to junk status Tuesday by Standard & Poor's, which could make it costlier to float bonds.
The move followed reports that Bell can't meet a deadline to pay off a $35 million bond debt for a failed land deal.