If you want to wade through some unutterably depressing reading on this Monday morning, you should spend some time with the official Detroit Proposal for Creditors. It starts by noting that the city’s per capita income, averaged over its 684,799 residents, is just $15,261 per year. (That’s less than half the income of neighboring Livonia.) Auto insurance alone eats up a good $4,000 of that, for residents with a car.

And then comes the litany of municipal woes: Detroit has the highest violent crime rate of any major US city, at five times the national average; there were 344 murders in 2011, of which just 39 were solved. Right now, the average response time, if you put in an emergency call to the Detroit Police Department, is 58 minutes.

Detroit’s infrastructure is crumbling: 40% of its street lights are out of order, and it has 78,000 abandoned and blighted structures, of which 38,000 are considered dangerous buildings. Those buildings account for a large proportion of the 12,000 fires Detroit has every year. At the moment, firefighters are instructed not to use the hydraulic ladders on their firetrucks unless there is an immediate threat to life, because the ladders have not received safety inspections for years. Detroit also has just 36 ambulances, of which generally no more than 14 are in operation at any given time. And in terms of the city’s IT infrastructure — well, you can probably guess; suffice to say that a recent IRS audit characterized the city’s income tax system as “catastrophic”.

As far as Detroit’s balance sheet is concerned, there is $9 billion of debt, excluding pension liabilities, and also excluding healthcare and life insurance obligations which are calculated at roughly $6 billion. Debt service in 2013 is projected at more than $240 million, or about 22% of total revenues. Worryingly, under the section of the proposal headed “Realization of Value of Assets”, one finds the priceless collection owned by the Detroit Institute of Arts:

Bill Schuette, the Michigan attorney general, has declared in no uncertain terms that DIA’s collection is off-limits when it comes to satisfying the obligations of the City of Detroit; he’s absolutely right. But you can be sure that there will be arm-twisting all the same: Detroit’s emergency manager, Kevyn Orr, doesn’t seem to think of DIA as anything beyond a store of recoverable value.

He wants to write down some of Detroit’s debt, as well — although far from all of it. Cate Long has a good round-up of how various bondholders will be treated under his proposal; she concludes that he’s treating bondholders in good faith, but that he’s behaving less fairly towards retirees. (It’s a combination you might expect, given that Orr was appointed by a Republican governor; it’s basically the opposite of how the Obama administration treated the bankrupt Chrysler and GM.)

It’s worth noting that even though Detroit is defaulting on millions of dollars of debt obligations, bondholders in general are not going to be hit, thanks to the wonders of third-party guarantees. For instance, Bloomberg reports that the 2028 general-obligation bond is currently trading at 96 cents on the dollar, “the lowest since March 2012″ (it’s backed by Assured Guaranty).

As a result, the real pain here is going to be felt by two main groups. The first is the companies who provide wraps for municipal debt — companies whose muni arms somehow managed to escape the financial crisis largely unscathed, and which had to expect some losses on all the debt they were insuring. It’s hard to feel any sympathy for them. But the second group — Detroit’s municipal retirees — had much less choice about taking on their unsecured exposure to the city’s finances. Looking at the straits Detroit is in, the bond default makes sense. But it’s not being driven by stratospheric pension costs, and the swipe at pensioners does look rather gratuitous.

As Long says, “this is merely an opening gambit by Orr”. Let’s hope that Detroit’s unions, as well as the people representing non-unionized workers, fight him aggressively. Because Detroit’s population is poor enough as it is. Those pension payments are needed — and what’s more, they will overwhelmingly be recycled straight back into the local economy. Unlike bond coupons.