WATERSMEET, Mich. (WOWO) — Rural communities across Michigan are facing growing financial pressure as rising costs, limits on property-tax revenue, staffing shortages and complicated grant requirements leave some townships struggling to maintain roads, public safety and other basic services.

In Watersmeet Township in the western Upper Peninsula, Supervisor Yvonne Clark is dealing with a long list of infrastructure needs while trying to make limited tax dollars cover the cost.

“It will take several lifetimes to get our roads up to par,” Clark told Bridge Michigan.

The township’s public safety building has a roof that leaks badly enough that workers use large plastic tubs to collect water and melting snow. Ceiling tiles have fallen, and police vehicles are left outside during the winter because the township does not have enough garage space.

“We’re all under financial stress,” Clark said, “and it grows every year.”

The financial concerns are not limited to Watersmeet.

A University of Michigan survey of local government officials found that smaller and more rural communities are reporting significant fiscal strain.

In the 2025 Michigan Public Policy Survey, fewer than half of the smallest communities — those with fewer than 1,500 residents — reported relatively good fiscal health. Overall, 56% of Michigan local governments described their fiscal condition as relatively good, down from 63% in 2023 and the lowest level recorded since the survey began tracking the measure in 2014.

The survey included responses from officials representing 1,328 local jurisdictions across Michigan.

Stephanie Leiser, one of the report’s authors, said the situation in smaller communities has reversed from what researchers saw before the COVID-19 pandemic.

“We’re especially concerned about smaller communities because, prior to the pandemic, they were typically among the healthiest,” Leiser said. “But now across a few different indicators, we’ve seen a reversal, and more small communities are raising red flags about their fiscal health.”

The University of Michigan’s more recent fiscal-health analysis, released in March 2026, found that Michigan local governments overall remain fiscally stable, but signs of emerging strain are becoming more apparent. The report noted declining cash reserves as pandemic-era federal aid winds down, along with rising debt per capita and ongoing long-term obligations.

For rural communities, the financial challenges can be especially difficult because there are fewer taxpayers spread across larger geographic areas.

Michigan townships depend heavily on property taxes, but state law limits growth in property-tax revenue. At the same time, local officials are dealing with inflation and higher costs for labor, equipment, construction and infrastructure.

Eric Lupher, president of the Citizens Research Council of Michigan, said rural communities face particular challenges when their tax bases do not grow.

“In rural Michigan, there hasn’t been growth, and with a static tax base, the limitations (on revenue) are squeezing tighter,” Lupher said. “And they’re hit with inflation like consumers. They’re feeling it from both sides.”

The University of Michigan survey also found that state and federal budgeting requirements are a significant concern for local governments. Sixty percent of local officials surveyed said they were somewhat or very concerned about meeting state and federal budgeting mandates, including reporting and matching requirements.

For small townships with limited staff, grant applications can become another hurdle.

Clark said Michigan’s Office of Rural Prosperity has been valuable in helping rural communities navigate grant opportunities, but the amount of paperwork required can discourage small governments from applying.

On her desk was a 25-page state grant agreement that will provide Watersmeet with $100,000 for new water meters.

“We have to file financial status reports monthly,” Clark said. “We have to do a detailed budget. We have to do progress reports quarterly.”

Clark said the requirements may be understandable for larger governments with professional grant-writing and administrative staffs, but they can be overwhelming for small townships.

“A lot of it is understandable, but it’s a lot,” she said. “When you’re a small township with not a big staff who can do this easily, it hinders people from even applying for the grant.”

Charly Loper, a community liaison with the Michigan Department of Labor and Economic Opportunity’s Office of Rural Prosperity, said a lack of funding is a common concern among rural municipal officials.

Loper said some communities are using aging equipment because they do not have enough money to replace it.

In one western Upper Peninsula community, she said, a snowplow from the 1970s is still being used. Another community estimates it receives enough funding to replace roads only once every 80 years, despite roads having an expected lifespan of about 30 years.

“Buildings leak, unsafe equipment continues to be used, roads fail, residents become frustrated with the issues, and municipalities cannot hire staff to tackle these challenges,” Loper said.

In southwest Michigan, the Village of Marcellus is dealing with similar financial pressures.

Village Manager Jacqueline Terrill said the community has been forced to make difficult choices about services.

“The people in this town, they want to know why we don’t have police anymore,” Terrill said. “We can’t afford it.”

Residents have also asked for improvements to local parks.

Terrill said children came to a village council meeting asking for a playground and even offered to help clean up the area. The village, however, does not have enough money to purchase playground equipment.

“We had kids come to the council meeting wanting a playground,” Terrill said. “They volunteered to help clean up the park area but we don’t have money for playground equipment. It’s very frustrating.”

Michigan’s rural geography can compound those financial problems.

Loper said rural communities are more likely to have large amounts of tax-exempt land, including state and federal forests. Lower population density also means there can be less property-tax revenue available for every square mile of roads and infrastructure that a township must maintain.

That is particularly evident in Watersmeet Township, where the Ottawa National Forest surrounds much of the community.

The township does not receive the same direct benefit from payments in lieu of taxes associated with federal land that a county receives. Gogebic County provided Watersmeet with $33,000 this year, but Clark said that distribution is not required and does not happen every year.

For a large government, $33,000 might represent a relatively small amount of money. For Watersmeet, Clark said, it can make a major difference.

“Thirty-three thousand might not sound like a lot, but for us, that’s half an officer,” Clark said. “It’s real money for us.”

The township has roughly 1,400 residents but is responsible for maintaining 36 miles of paved roads.

Clark said resurfacing a single mile can cost approximately $450,000.

The township’s entire annual road budget is less than $200,000.

“And we have another 42 miles of gravel roads that need to be maintained,” Clark said.

The funding gap has left local officials searching for grants and other sources of revenue to address basic infrastructure needs.

Terrill and Clark both said they believe smaller communities can face disadvantages when competing for grants because they often lack the staff and resources needed to complete complicated applications.

“We do gymnastics to get the grant money we get,” Terrill said.

She said some state training sessions focus on grants that are designed for larger communities and do not fit the needs of small rural governments.

“They really need to pay more attention to us,” Terrill said. “If we don’t get grants, we don’t have a town.”

Clark said the state’s rural communities need additional attention and assistance.

“I wish they would understand that small communities don’t have the capacity for the paperwork required by grants,” Clark said. “But I’m not sure they even know we exist in Lansing.”

Loper said the Office of Rural Prosperity can help rural governments identify resources and navigate the challenges they face.

The University of Michigan’s research shows that the concerns extend beyond individual communities.

In the 2025 survey, only 24% of local governments statewide said they expected to be better able to meet their fiscal needs in 2026. Twenty-five percent expected to be less able to meet those needs, while 46% anticipated little or no change.

Looking five years ahead, 49% of jurisdictions expected relatively good fiscal health, compared with 56% reporting good fiscal health at the time of the survey. Fourteen percent anticipated high fiscal stress in five years, compared with 8% reporting high stress at the time.

The university has also reported that local officials increasingly see the state’s existing funding system as inadequate to maintain or improve services. In a 2025 survey, only 29% of local officials said Michigan’s current system of funding local government would allow their jurisdiction to at least maintain its existing services.

For rural township leaders, the issue is increasingly about what services they can continue to provide with the money available.

Roads need repairs. Buildings need maintenance. Equipment needs replacement. Police and emergency services require personnel. And small governments must compete for grants while often lacking the staff needed to complete the paperwork.

Clark said she understands state officials face their own financial and political challenges, but rural communities have less room to absorb rising costs.

“I know they have their own problems down there,” Clark said. “But we’re affected more in the rural areas because we don’t have enough cushion. We’re bare bones.”