They need to spend every penny on revitalizing from the core out. Work out from downtown (which is still lackluster) to the slums on making it more appealing to all kinds of people. The more they spend on that, the more tax income they can gather to spend on less important, but appealing things. Police and schools should also be high on the priority list. I actually think they have a great opportunity to completely reinvent the city. With a little (or a lot) of help from the state, it can definitely be salvaged.
Agreed.. and you're not going to turn the slums into paradise overnight... but like a deep cut wound... you have to stop the bleeding. Stopping the bleeding is a good first step towards recovery.
If people have a sense of "okay.. things aren't great, but they're getting better", they won't leave.