By John Kiesewetter
The Cincinnati Enquirer

MONROE - City officials finally may learn this week if a fiscal emergency will be declared by State Auditor Betty Montgomery.

The state auditor's office has been reviewing finances in Monroe, where a $3.1 million deficit in several 2002 budget accounts was discovered last spring.

The city had asked for the review in November, after turning a $650,000 general fund deficit into a $1.4 million surplus with deep budget cuts.

"We have spent the last several weeks trying to reconcile some numbers so the state has the most accurate beginning balance" for their analysis, said Jay Stewart, the planning director named acting finance director last year.

"The report from the state could come as early as next week, late in the week ... or the following week," he said.

The state will declare a fiscal emergency if deficits exceed one-sixth of general fund revenues, according to Montgomery's Web site.

Under a fiscal emergency, a two-year oversight commission consisting of state and Monroe officials and three at-large members would devise a financial recovery plan. The commission has "widespread authority to review all revenues and expenditures," according to the state auditor's Web site.

A fiscal watch means the city deficits exceeded 1/12 of its total general revenue funds. Under a watch, the auditor's office gives technical support to end the financial crisis.

The discovery of large deficits in fire and police accounts, dating back four years, led to the resignations of the City Manger Donald Whitman and Finance Director David Collins last year.

Stewart and Bill Brock, the former assistant city manger who took over operating the city a year ago, have stressed that the city has an auditing problem, not a cash problem. The city must repay $3 million to the fire and police accounts used to pay for construction of the new city hall, two firehouses and the city garage, Stewart said.

Brock indicated in February that he expected the state to declare either an emergency or a watch. "They (state auditors) have great concern over those negative fund balances," Brock said.

City leaders are braced for more tough times, even after the state announcement.

Council next year must begin paying the bond principal deferred in last year's bail-out plan; decide whether to resume the street repaving canceled this year; consider replacing an aging fire truck; and come up with more than $800,000 in matching funds for widening Ohio 63 east of I-75. Police and fire employees' contracts also come up for renewal next year.

E-mail jkiesewetter@enquirer.com