The idea, is that you only should pick the fortified upgrade if its a border-city that you absolutely want to protect who is at risk of being sieged. It gives better garrisons and more artillery to achieve this.
If its not in imminent danger, realistically it would be dumb to fortify a city thats protected by allied territory all around it. Sure, some world leaders did it back then, but its gonna make them lose money and never use the fortifications. Leaders make bad decision ALL the time. Its smarter to choose the economy version when the city in a safe inside your territory.
If, for example, you are bordering Rome(as a greek faction) and you are nervous they may declare war on you, make it fortified just in case. Thats what i do with Apollonia.. since if Rome declares war, thats a 1 turn boat ride across the sea.... so i want that to be safe with just a garrison(and a barracks).
In my opinion it currently functions fine.
It would be unbalanced if the fortified building was economical enough/or buffed too much with troops and artillery. It already serves its 'role' quite well.