Older cities in Michigan are facing a set of common problems - while the troubles of Flint and Detroit are well-known, even cities generally thought of as financially well-off, such as Ann Arbor and Royal Oak, are facing similar difficulties. Mayor Hieftje has described all of Michigan's cities as lined up and running towards the same cliff: Ypsilanti is likely to be one of the next to go over the edge, while Ann Arbor is near the back of the pack, but still headed towards the cliff.

Several factors are generally seen to contribute to these problems:

  • Municipal balkanization: the hemming in of older cities by incorporated suburbs, as Detroit is, or by Charter Townships, a uniquely Michigan legal concept that serves to make annexation basically impossible, prevents Ypsi and other cities from expanding in land area. This allows new development - new tax base - to take place in Townships, taking advantage of services created by the nearby city but not allowing the city to leverage that tax base.
  • Infrastructure costs: older communities have older roads, water, and sewer systems - in some Michigan cities, 100-year-old wooden water mains are still in use. This aging infrastructure has high maintenance and replacement costs, especially use is heavier per segment than in more sparsely settled Townships. The City of Ypsi recently undertook a program of major road replacement and utility system upgrades in hopes of getting ahead of maintenance on crumbling infrastructure.
  • Tax-exempt property: The City of Ypsilanti is host to Eastern Michigan University, a large number of churches, libraries, museums, and other non-profit organizations that serve the region. These institutions remove approximately 1/3 of the City of Ypsilanti's land area from the property tax rolls, but still use the roads, utilities, police and fire departments, and other services paid for by those taxes.
  • Retiree costs: Michigan's older cities have larger retiree populations than new-growth municipalities, which, accompanied with the benefits packages that became standard for public employees. Where rapidly growing Townships may have not required any full-time employees prior to the 1970s or '80s, and therefore have a very limited number of retirees relative to their fast-growing tax base, older cities have seen their staffing needs remain relatively constant, as well as their tax base. With American health care costs rising much faster than inflation, these expenses have proved an unexpected burden.
  • Limits on taxation: The Headlee Amendment to the Michigan Constitution, passed in 1978 places a strict cap on municipal tax revenues, requiring cities to reduce the tax rate collected each year; Proposal A, passed in 1994, prevents the taxable value of property from rising as quickly as property values rise. Together, these amendments generally limit growth in tax revenues to less than the rate of inflation, while health care costs, wear on aging infrastructure, and other such costs rise faster than the rate of inflation.
  • Mandatory arbitration: A large portion of municipal budgets is public safety services, including fire and police, which are subject to mandatory arbitration under Act 312 in the case of contract negotiation disagreements. Some critics have blamed Act 312 for increasing personnel costs, and for hindering regional cooperation among neighboring governments.

Overall, these factors mean that Michigan's older cities find themselves in a position where they must continually cut public services in order to stay fiscally solvent. The City of Ypsilanti has found itself at the point of eliminating its parks and recreation department and and reducing staffing levels in all departments. At the present rate, the City expects the next few years to see the reduction of police and fire staffing levels, elimination or reduction of building inspectors, ordinance enforcement, and planners, and other such cuts.