However, Treasurer Dillon also reportedly said that “What can be done in a Chapter 9 can be done outside of a Chapter 9 ..." That's not true. No state or city manager appointed by the state can compel parties to contracts to renegotiate their terms; the states cannot "impair" contracts.That would be unconstitutional. Only Congress has that power under the bankruptcy clause of Article I of the Constitution. (See here.)
It could be that Dillon is blowing a little smoke to put some fear into retirees whose unfunded pension and retiree health benefits loom large in Detroit's financial distress. Will continue to keep my eye on this.
One more thing: Check here for another, more encouraging post about Detroit.