Dan Horn, and Patrick Brennan

Cincinnati

Ohio Auditor Dave Yost declared a fiscal emergency in Norwood on Thursday after learning the city's deficit had ballooned to more than eight times the size it was at the end of last year.

The deficit isn't huge -- about $306,000 -- but auditors became alarmed by the sudden increase and decided immediate action was necessary. The move means the city will get 120 days to come up with a plan to put its financial house in order and submit it to a commission overseen by Yost.

It's not a state takeover of the city and the auditor won't tell Norwood how to spend its money. But the state will require the city to stick to its plan.

If it doesn't, the auditor could take the unusual step of going to court. Yost said he doesn't think such drastic measures will be necessary, but he believes the growing deficit must be addressed soon.

"That is way, way, way in the wrong direction," Yost said of the deficit's sudden rise. "You're driving the wrong way on a one-way street. It's time to hit the brakes and get the car turned around."

Hamilton County's second largest city has been trying to get things turned around for a while now. The state auditor put Norwood on "fiscal watch" 12 years ago because the city of 19,000 was struggling to pay some of its bills, and it's been there ever since.

Despite big developments like Rookwood Pavilion and Rookwood Exchange, which boast restaurants, stores and hotels, Norwood's economy suffered some major losses during the recession and still is trying to recover. Hundreds of jobs, along with the earning tax revenue that came with them, left the city as companies such as Medpace, U.S. Playing Card and Zumbiel Packaging moved elsewhere.

Norwood Mayor Thomas Williams couldn't be reached for comment, but he has said in the past that those losses along with deep cuts in state aid to local governments have taken a heavy toll.

Yost's declaration of a fiscal emergency doesn't happen often. Norwood now is one of just 22 Ohio communities with that designation and is by far the largest in Greater Cincinnati. St. Clair Township in Butler County, the area's only other community in fiscal emergency, received that designation two years ago.

Norwood has a history of financial woes dating to the decline and fall of its automotive industry in the 1980s, when General Motors shuttered its plant there. The state auditor declared a fiscal emergency in Norwood from 1980 to 1982.

Yost said the biggest problem this time around is spending. He said auditors don't believe money is missing, only that there isn't enough to pay all the bills.

"I can't speak to causation," Yost said. "City council and the mayor need to live within their means."

The city's balance sheet, which was included in the state audit, shows Norwood's deficit rose from $38,000 to $306,000 from December to June. Street construction and repair, emergency medical service and the retirement of a $1.5 million bond payment all helped drive up that deficit.

The city started feeling the pinch early this year, though Norwood's auditor, Jim Stith, told city council in August that he did not believe Norwood would meet the criteria for fiscal emergency.

According to minutes of an Aug. 9 city council meeting, Stith told council members spending was too high. "We spend more than we make," he said.

He also said some vendors hired by the city had stopped doing business with Norwood because the city was 60 to 90 days behind in paying them. Stith declined comment when contacted Thursday.

Despite its recent troubles, Yost said Norwood, which has an annual budget of about $20 million, should be able to bounce back. He said the city is relatively stable in terms of its tax base compared to other communities in fiscal emergency.

"Norwood has a lot of options. Its fundamentals are fine," Yost said.

The declaration of fiscal emergency requires the city to come up with its fiscal plan within 120 days. Once the commission and auditor agree on that plan, the city will be required to live by it.

The state won't order the city to make specific cuts or tax increases, but it will continue to monitor the bottom line until Norwood's finances are out of the red.