Frustrated by the lack of concrete progress, Michigan Governor Rick Snyder, a Republican, last month appointed a team to scour the city's books.
The audit could result in a state takeover of Detroit's finances through the appointment of an emergency financial manager.
Such a manager, who would seize control of the city's checkbook, could then propose federal bankruptcy court as the best option.
Snyder, who has called the situation "a crisis in terms of financial affairs," said the team would deliver its report in February.
"Detroit is teetering on the verge of bankruptcy after the City Council has failed to make the necessary cuts to deal with having a smaller population," said Rick Jones, chairman of the Republican majority caucus in the state Senate.
Jones, who has indicated he does not favor a bankruptcy, said he would like to see an emergency manager installed to fix the city's problems. If that failed, there would be a case for finding a way to shrink the Detroit municipal area, he argued.
Detroit's population is now just over 700000 - down 30 percent since 1990 - but the city still has to provide services to an area encompassing more land than San Francisco, Boston and the borough of Manhattan.
While Democratic Mayor Dave Bing and the Detroit City Council have moved to reduce spending and initiate some reforms to stave off a takeover, including layoffs and wage and benefit cuts, the progress may not be enough for Michigan officials and lawmakers.
Image: Vacant and blighted homes are seen in a once vibrant east side neighborhood in Detroit in this January 27, 2013 photo.