The problem is that in the medium term the costs for policing, fire services, schools, etc all rise because you have to pay more to attract people to live and work in the expensive city. The only way to do that is through taxation[1]. In the long term that higher taxation drives away the companies, so you're left with an expensive city that can't afford to raise enough revenue to run. Then the city goes bankrupt.

The preferred solution is to not let things get out of hand in the first place.

[1] There are other options like stopping having these things provided publicly but few people would advocate that.