The near death of Petersburg has been exaggerated a little for headline effect.

They have to take serious cuts of about 15% in spending to remove their structural deficit, at which point they can probably stabilize and qualify for some short term financing to pay their bills while they finish reorganizing their financials.

Bad news: They have been overspending their revenues by about $3M-$5M annually since 2009, and had very poor accountability in their budget practices. Given the size of their budget ($100M) this was akin to a modest leak that should have been plugged but wasn't. They then resorted to short-term financing (borrowing against future tax receipts) to cover bills and payroll after they drained their cash reserves, which should have been an indicator of real problems but they let it become business as usual and apparently ignored the warnings from their auditor and financial advisor.

Good news: The state helped bring in real financial consultants with a good track record (PFM) to study the situation. These are experts and the cuts they identified, while painful, are not drastic except for the school system. 10% across-the-board pay cut, cutting nice-to-have positions, hiring freezes, raising cigarette and meals taxes and garbage fees, but not raising real property taxes. Paying $20/mo for garbage, 50 cents/pack cigarette tax and 7.5% meals tax is not the end of the world. That is just regular revenue generation for most Virginia cities of that size.