The wages mentioned in the article do not seem excessive.
If history is any guide, the funding will eventually be found somewhere and the City employees will receive backpay to supplement the MW payments and bring them up to date. This has usually been the case when, for example, government workers are furloughed due to a budget impasse.
Without question, any wages that are covered by a Collective Bargaining agreement will be recouped, as the City is blatantly breaching those contracts, notwithstanding a lack of funds.
The percentage increase in taxes is only half the relevant information. What is the tax level now? How does it compare with comparable municipalities? Are other revenue streams available?
In this case, Bankruptcy is the logical, fair option, provided it can be done under applicable PA laws. Any contracts (including collective bargaining agreements) may be rejected or renegotiated at the discretion of a trustee, and the City can work through its troubles. Anyone working for the City who feels unjustly abused can go find better employment wherever it may be had.
Just like in the Real World.