In any event, go here to read a piece by Jeff Shapiro of the Richmond Times-Dispatch about the current dire financial straits of the City of Petersburg. Like many cities in northern Rustbelt states, the residents of Petersburg are victims of an economy that no longer values unskilled labor and an elected municipal leadership that, at best, was (and perhaps is) incompetent and at worst bordered on the corrupt. Thus,
To help pay its creditors and balance its budget, Petersburg, facing a $12 million deficit and $7 million in unpaid obligations, is imposing painful economies. Among them: layoffs, a 10 percent reduction in municipal salaries, and higher taxes,Shapiro bemoans the fact that Virginia's General Assemble doesn't permit the Commonwealth's cities to seek to adjust their debts under federal bankruptcy law. Whatever warrant there may be for changing the law, it ain't gonna happen. (On a related note, see my comments on the legislative rebuff to my testimony on a much less contentious change to Virginia's exemption laws here.)
I am intrigued by Shapiro's other suggestion--that Petersburg dissolve itself as a city and throw itself on the larger tax rolls of, say, Prince George or Chesterfield County. Turnabout is fair play. For many years anyone of wealth has moved to the 'burbs leaving cities as depopulated and poor husks of their former selves. Gentrification is reversing that process in some cities (nearby Richmond, for example) but it's not likely to benefit Petersburg in the near future.
A receiver appointed by Virginia's courts, also mentioned by Shapiro, could address incompetence and corruption but a receiver can't force creditors to take less than what they're owed (unlike Chapter 9 bankruptcy) and thus has limited power to solve Petersburg's problems.
In short, a mess. And one's for which there's no solution ready at hand.