By Steve Kemme
Enquirer staff writer

NORWOOD - Norwood doesn't look like a city going broke.

Day and night, cars stream in and out of the packed parking lots at the Rookwood Pavilion and Rookwood Commons retail centers. Nearby, workers finish the first office building in the $47 million Cornerstone at Norwood complex.

Norwood has come a long way since it lost 4,000 jobs and 35 percent of its tax base when the General Motors Camaro plant closed in 1987.

In an economic recovery, this city of 21,675 residents has attracted about 1.7 million square feet of new commercial and office development since those bleak days. The thriving Central Parke office complex sits on the old GM site.

Yet Norwood, Hamilton County's second-largest city, is running out of money.

It faces a $2.6 million year-end deficit in a budget of $16.6 million and barely made Friday's $365,000 payroll. The city has warned about 190 employees to expect to miss all or part of their paychecks soon.

The Ohio Auditor's Office is expected to declare Norwood in a state of fiscal emergency this year and help develop a two-year plan that could include employee layoffs, service reductions, fee increases and a tax levy.

Norwood suffered through a similar fiscal emergency during the early 1980s, when GM began downsizing.

There are 14 communities on Ohio's fiscal emergency list, including Monroe in Butler County and Corwin in Warren County. The current financial crisis has angered, saddened and bewildered Norwood residents. Eighty-five percent of the voters on Aug. 3 rejected a proposed levy that would have generated $26 million for the city over five years. The price was steep.

The levy would have raised the taxes on a $100,000 house by $412 a year.

"I think it's awful," said Juanita Herrell, who has lived in Norwood for 30 years. "After all those new buildings went up. It's a shame. I've always loved Norwood."

So what went wrong?

Simply put, overspending and failing to build a rainy-day fund.

During the tenure of former Norwood Mayor Joe Hochbein and his administration, the city spent and borrowed money in anticipation of major commercial and office developments that never materialized or were delayed.

The Cornerstone at Norwood and the Rookwood Exchange, which is caught in a court battle over whether the city can take homes to make room for it, are two examples. The former Globe site near the Norwood Lateral still sits empty.

Norwood borrowed $4.75 million in 1998 and $1.9 million in 1999 for street improvements and other projects. The city now shoulders $1 million-per-year debt payments on those loans.

"The frustrating thing with the Hochbein administration," Councilman Keith Moore said, "was that when the economy went bad and revenue went down, there was still a constant push to spend more and more. There was no looking ahead."

Hochbein, a Republican and lawyer who now lives in North Avondale, blames a Democratic-controlled City Council for delaying development projects to make him look bad.

"They dragged their feet for political reasons and did not go forward with development projects that were ready," said Hochbein, who resigned as mayor last year for health reasons. "They can use me as a scapegoat if they want. But the problem is they fundamentally lack the vision and the ability to get the job done."

Moore acknowledged council had voted to slow down some projects, mainly because it didn't trust Hochbein to scrutinize the projects carefully enough, he said. But Moore said the sluggish economy and other issues would have delayed those projects anyway.

Moore and the other six Democrats on the nine-member City Council also criticize the labor contracts Hochbein negotiated.

The police averaged about a 4 percent salary increase in the past five years and are scheduled to receive a 7 percent increase next year. Firefighters and paramedics received a 6 percent salary increase in 2000 and 4 percent in the next three years. The city covers all health insurance costs for most of its employees.

Earlier this year, council unanimously rejected a fire division contract negotiated by former Republican Mayor Victor Schneider calling for pay raises of 3 percent this year and 6 percent in each of the next two years.

"It's not that the police, firefighters and paramedics don't deserve it," said Councilman Joe Sanker, chairman of the Finance Committee. "It's that we don't have the money. When you have 2.5 percent increases in city revenue and are giving 5, 6 and 7 percent wage increases, it's going to catch up with you."

Hochbein, who enjoyed a Republican-controlled council from 1996 to 2000, said he believes the contracts he negotiated were sound for the city.

"I left Norwood on a track of growth and progress," he said. "City officials are in a tough place, but I think it's one of their own making. I don't take any glee from that. I have a great affection for the people of Norwood."

Vicki Garry, former Republican Norwood law director, said City Council must share the blame with Hochbein for the labor contracts.

"They approved the contracts without knowing how much they were going to cost," said Garry, who has lived in Norwood for 11 years. "They could have asked for more accountability from the mayor. A person doesn't go out and buy a house without knowing what the mortgage payments are going to be."

Treasurer Tim Molony said he told council about six years ago to build a surplus fund for tough times.

"I was told that every penny we get should be spent on infrastructure," he said. "So when the economy went south, we didn't have any cushion."

Molony said this financial crisis has been brewing for many years. Windfalls bailed the city out of anticipated deficits of $700,000 in 2001 and $1.2 million in 2002.

In 2001, Norwood received a $200,000 rebate from the Ohio Workers Compensation Fund and $100,000 from a lawsuit filed by many municipalities against Cincinnati Bell. The next year, Norwood received more than $1 million from the sale of Anthem stock when the health insurer turned into a for-profit company.

Last year, Norwood refinanced its debt to avoid a $1.5 million deficit. Earlier this year, a bank agreed to let the city postpone for one year a $1 million payment on outstanding bond obligations.

As city officials brace for painful decisions about whose jobs will be eliminated, Norwood employees - many of whom live in the city - wonder if they'll receive a paycheck on Sept. 10, their next payday.

Jim Shelby, a city housing inspector, is trying to remain upbeat during this difficult time.

"I come to work every day and do the best I can," he said. "I know we'll eventually get paid."

Melissa Andler, secretary to the Norwood Fire and Police Chiefs, worries how missing paychecks might affect her family, but says it's preferable to layoffs of co-workers. (Enquirer photo/ERNEST COLEMAN)

Melissa Andler, secretary for the police and fire chiefs, worries about possible financial setbacks for her family, which includes her husband, Jeff, and their two children.

"It's disturbing to think you might miss a paycheck," she said. "But I'd much rather skip a paycheck then have one of my co-workers lose their job."

Like Shelby, Andler, a lifelong Norwood resident, feels optimistic about the city's future.

"Norwood has been through tough times before," she said. "It's a strong community. People stick together through bad times."

Some residents fret about what reduced city services could mean to them.

Paige Jarrell, who lives in Norwood with her husband, Frank, and their two children, said she hopes the police and fire divisions won't suffer deep cutbacks.

"It concerns me that emergency response time might be slower," she said.

Vicki Baird, who bought a house in Norwood two years ago to live next door to her daughter, said it's important for city officials to devise a clear financial plan for the future and to stick by it.

"It's frustrating that we're in this position," she said. "I'd be willing to pay a tax increase if there's accountability and a good plan in place."

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E-mail skemme@enquirer.com