Easy!
You emerge from bankruptcy as an institution who has learned the value of frugality, practicality, and common sense. You deliver stability and value for the buck to residents. You demonstrate conscientious and down-to-earth conservative values and management principles.
Of course, to do these things it might be necessary to secede from California.;-)
“How do you come out of being labeled a bankrupt city to one that is a desirable place to live?”
From what I have read, Ole Osby and Co. in Vallejo didn’t really do what was required to make Vallejo a “desirable place to live.” They have only staved off yet another return to bankruptcy court because they “ kissed ass” with their cops and firemen and left in place parts of union contracts which will lead them back into bankruptcy.