I agree this is the main take-away from the piece. The tax base has just collapsed. Surely there was some mismanagement, but even without that they would still be in trouble.
Shrinking is always going to be a painful and not easy process, but the raw numbers suggest that it was doable.
http://www.freep.com/graphics/financial-history/detroit-bank...
This begets the downward circle the article refers to, i.e., that because of lower property tax revenue, they have to raise other taxes which in turn cause further decline, etc.