1. Legalize drugs. Allow local municipalities to regulate and tax recreational substances. Boom. You have an instant local revenue stream, the police are suddenly out of the business of arresting people for "possession", and can focus more on violent crime, domestic disturbances, etc. In the short term, drug-funded gangs will turn to theft and robbery to stay in business, but anyway a major, relatively safe and easy source of revenue will be gone.
2. Declare certain urban areas to be economic development zones with drastically reduced taxes and regulations. Make it dirt cheap to locate factories and plants there. Provide start-up grants to local entrepreneurs, with real oversight, not just feel-good handouts. Lower the barriers to business start-ups and there will be business activity, and it will accelerate as the cycle of crime and poverty is reduced.
3. Fix the K-12 schools. Double the teachers' pay, double the security around the schools and provide secure bus rides to and from the projects and tenements. Make the school day longer, and ratchet up the standards. Demand higher achievement, and don't let a kid just flunk and walk away; make them re-take, make them realize the importance. Make school a destination, not a chore.
Teach democracy in the schools. Emphasize basic literacy skills, ethics and morality, history, how to speak and write properly, mathematics and science. Make the schools the best in the state in terms of standards.
These are all easier said than done, but can we afford to do anything less? We have spent trillions of dollars trying to fix similar problems in other countries, so why not spend a tenth of that or a thousandth of that fixing some of the problems in our own country?