By Michael D. Clark
The Cincinnati Enquirer

MIDDLETOWN - The future isn't bright for this city's finances as tax revenues continue to fall and leaders begin searching for solutions.

City Manager Ron Olson told City Council members Tuesday that overall finances are stable, but that will change in 2004. Leaders now are forced to consider the first tax amnesty in the city's history, cuts in services, layoffs, and possible fee and tax increases for the 52,000 residents.

If nothing is done, said Olson, "by mid-2005 we will have a very significant problem," but he added: "I don't want this to sound like gloom and doom for Middletown.

"We have the time and we have the means to create a rational solution to these problems," he said of the city's declining savings.

Tax reserves are growing by about 2.5 percent annually, but are being outpaced by expense increases of about 3.5 percent per year.

Financial Director John Lyons proposed an amnesty for delinquent city taxpayers from Aug. 1 through Sept. 30, when residents could apply to pay off their back taxes until Dec. 31 without any interest or penalty charge.

Lyons told council that the program could raise $20,000 to $250,000, depending on the level of participation.

Council ordered Olson to report back with a combination of possible tax revenue enhancements at the July 15 meeting.

Mayor David Schiavone said the sluggish national economy "has every community in the country dealing with these sorts of issues," but he expressed confidence that city officials will have a plan by the end of August that will deal with the looming financial woes.

In other council action, members approved the termination of Aaron McQueen, a police officer since 1995.

Police Chief Bill Becker, with Olson's approval, fired McQueen this week after an internal investigation of the 34-year-old officer. He was accused of violating departmental rules including complaints of neglect of duty, unsatisfactory performance, false reports and leaving a duty post.

Becker said his department has also conducted a criminal investigation and plans to present the findings to the Butler County Prosecutor's Office to determine whether any charges should be filed.

Becker said the violations occurred while McQueen was working special traffic enforcement detail between May 2002 and April 2003.

E-mail mclark@enquirer.com