These Photos Of Detroit's Golden Age Show The Dramatic Decline Of One Of America's Greatest Cities

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4. Overview of New York City’s Fiscal Crisis

The Ford administration was concerned about setting a precedent and having other public agencies come for federal assistance. As a result, the conditions were set so that no other entity would ever want to come to the federal government for help. In addition, the major stakeholders, banks, employees, and state taxpayers had to provide additional assistance. Following are the major conditions:
• The city was forced to hike fees for services, especially for the city university and the subway. Other services were cut. The city’s work force was trimmed and a wage increase was rescinded.
• Up to 40 percent of the assets of the city pension fund were invested in MAC securities. The state pension fund also invested in MAC securities. A total of $2.7 billion of city debt was bought by the pension funds.
• The banks who had served as the underwriters for New York’s securities agreed to purchase additional securities and/or lengthen the maturity or lower the interest rate on the securities that they held. Other holders of securities had to exchange them for ten-year MAC securities or face a three-year moratorium on the repayment ofprincipal on the notes. The banks turned in $819 million in notes for MAC debt and restructured the interest and maturities of the other debt they held.
• The city raised taxes an additional $200 million.
• The city would have to balance its budget by 1978. The budget had to be balanced using generally accepted accounting principles. Most notable of these were the elimination of financing operations from capital funds and a requirement that the city fully fund its pension plans.
• The First Deputy Mayor, Deputy Mayor for Finance, and the budget director all had to resign so that trustworthy staff could be appointed.
• The federal loans were made at 1 percentage point over the cost of funds to the federal government.
• The city was obligated to regain access to the credit markets in 1978.
At this point, New York City was again able to borrow, but only from the institutions that had a stake in its survival, namely the banks, the state and federal government, and from the employees' pension funds. The city was still unable to borrow in the municipal bond market.

http://www.library.ca.gov/crb/95/notes/V3N1.PDF

The Gerald Ford administration initially refused to assist New York City. Eventually, the Municipal Assistance Corporation was set up by the State of New York. MAC took over funding and borrowing, and it oversaw the fiscal matters of the city.

I suppose that the New York solution could be applied to Detroit, but I doubt whether there is sufficient future tax revenue available to get Detroit back to a balanced budget in 3 years. In New York, enough budget cuts could be made and enough taxes could be raised in order to restore a balanced budget and eventually pay off all the creditors in full, including the US Treasury.