It's pretty clear that some version of bankruptcy is now a credible option for municipalities. Appeals will fly wildly for the next few years but everyone involved will be losers in one way or another. GO bonds (for the first time) are being lumped in with the revenue bonds and bonds not fully backed by full faith and credit of Detroit. Pensions are implied to be equal to bonds but all this needs to get worked out.
Bond insurance will now probably become more expensive and less available for issues not highly rated.
Muniipalities and states (to a lesser extent) are rather opaque. Liabilities can be carefully hidden that can suddenly lower the credit rating or make the municipality default. A large employer can suddenly move or go out of business that can sink an otherwise solvent municipality. I have personally stopped buying municipal bonds or muni-bond funds. With what I'm seeing, it's no longer worth the risk.
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius