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IN-DEPTH: Another financial crisis for Norwood

SUBHEAD:

Narrow escape leaves city hoping future shows up

 

Cincinnati Enquirer

April 5, 2013

With just three days until the deadline, the city last week finalized what one city official called an “unusual” refinancing deal with private investors. The deal bumps up the interest rate the city must pay from 4.77 percent to 7.5 percent, but it buys the city some time and gives it some flexibility to begin catching up on numerous unpaid bills from 2012, including electric, phone and supplemental health-care reimbursements to employees.

With one financial crisis averted, however, the city now faces another – an estimated budget shortfall of $1.7 million this year based on expected revenues of $18.3 million.

City Council has already slashed the city health department’s 2013 budget in half, raising questions about whether the department will survive. The city also is seeking concessions from workers

Recession, job losses leave city reeling

It all points to a city living on the edge, and for Norwood it’s hardly the first time. The city of 19,000 has been on the state auditor’s fiscal watch list since 2004. Twenty-five governments are on the more serious fiscal emergency list, including the Clermont County village of Bethel, the Warren County village of Waynesville and Manchester Township and Manchester village, both in Adams County.

Norwood has a history of on-again, off-again financial problems that date back years – even before the 1987 closure of the General Motors assembly plant, then the largest employer.

“We are still in business,” said Keith Moore, chair of city council’s finance committee. “We’re still working hard to find a way to make this work and still provide all the services we do.”

Moore and Mayor Thomas Williams said several factors have contributed to the city’s current plight:

· Hundreds of jobs – and earning tax revenue – have left the the city in recent years as drug-testing company Medpace and manufacturers such as U.S. Playing Card Co. and Zumbiel Packaging have left the city, taking hundreds of jobs –and earning tax revenue – with them.

· The Great Recession delayed several large developments – and the earnings taxes they will generate. Those include Rookwood Exchange and a project near the Xavier University campus at Dana Avenue and Montgomery Road expected to include a bookstore, health center, student apartments, retail and offices. “Did anyone foresee what was going to happen five years ago?” Moore said. “The whole financial sector was in crisis.”

· State funding cuts, including cuts in the local government fund and elimination of the estate tax and personal tangible property tax, have slashed Norwood’s budget by $1.6 million over two years, Moore said. “The structure of the city government was premised on the idea that revenues would be at least sort of stable. We didn’t expect revenues to plummet,” he said. “ ... We don’t have any cushion left.”

Such challenges are not uncommon in Ohio communities, said Kent Scarrett, director of communications for the Ohio Municipal League.“Revenues are up, but not nearly enough to match the losses from the last (state) budget and the state cuts.”

Officials ask for more concessions from unions

Norwood flirted with disaster last month as the deadline for making bond payments approached. “Banks were not interested in lending us anything,” Moore said. The city eventually turned to private investors and worked out what he called “an unusual financing deal for a municipality, but it does buy us some breathing room.”

Two years worth, as it turns out – the city has until April 27, 2015, to pay off the expected $1.77 million debt.

Still, there’s not enough revenue to cover this year’s expected expenses.

“It’s not like we’ve got anything you can point to and say, ‘They’re just blowing money on this,’ ” Moore said. “We don’t have cultural programs. It’s police, fire, streets, parks and the health department. The revenues have just not been there.”

The biggest chunks of Norwood’s budget go to the fire and police departments. Last year the police department accounted for 33 percent of general fund expenditures; the fire department 35 percent.

In 2011, the police and fire unions agreed to concessions worth $1 million a year. Now the city is going back to those unions, and the much smaller public works and clerk unions.

“We’re working with our bargaining units, trying to figure out a way we can reduce our operating costs,” Williams said. “Three out of four we’re making progress with.”

Bobby Schlachter, president of the firefighters union, said discussions have focused on health insurance.

“I know the city is adamant that all the unions are on board with it. We are willing to help,” he said of firefighters. “We understand that if the city goes under … we’re out, too.”

A police union spokesperson did not return calls.

Health department workers scramble for funding

One casualty, though, could be the six-employee health department, which the city is not required to fund. It operates immunization clinics, keeps vital statistics, tests drinking water, oversees environmental health and provides school health programs.

In March City Council cut the department’s 2013 budget in half, to $261,000.

“Of course we were very disappointed,” said Gary Arthur, president pro tem of the Board of Health. “I feel the quality of a health department sets the stage for the quality of the city.”

Residents Lynn Ellis and Susan Knox are trying to save the department. One possibility: Put a levy on the ballot to make the department self-sustaining starting in 2014.

To get through this year, Ellis, Knox and others cobbled together a plan that relies on funds from grants and donations and leaves open the position of health commissioner.

Although the short-term outlook is challenging, city officials say the long-term picture is brighter. Paycor is building a headquarters at Linden Pointe. The Mercy Health-Rookwood Medical Center is under construction. A Courtyard by Marriott hotel is being built at Rookwood Exchange, with a retail and office complex to follow.

“Two years from now, we should be in a much better position,” Moore said. “We should have our cash flow worked out. We should be stable.”⬛

SIDEBAR:

Retirees not getting health help

Among those feeling the pain of Norwood’s financial plight: about three dozen retired city police, firefighters and their beneficiaries who have not received reimbursements for out-of-pocket health care expenses since September.

“I know (the city) is hurting, but that’s not our problem,” said Bob Gatto, who retired in 1993 after 25 years as a Norwood police officer.
He said about 38 people are affected by the non-payments “and seven months is a long, long time.”

In 2009, Gatto and other retirees sued when the city balked at paying into a supplemental retirement trust fund. The result was a consent decree, issued in November 2010 by Judge Charles J. Kubicki Jr., that said the city should continue to operate the plan. It covers workers hired before 1975 with at least 20 years of service.

“We expected them to live up to the judge’s ruling,” Gatto said. “I got widows calling me that need the money.”

Painful financial history

Norwood knows what it’s like to be pushed to the brink of bankruptcy. In the early 1980s the city struggled mightily through a recession and cutbacks by its largest employer, the GM assembly plant. When the plant closed in 1987, the city lost $2.6 million in tax revenue. City payroll was cut. Payments to police and firefighter pension funds were halted. Maintenance of parks, streets and buildings suffered.

Norwood’s survival hinged on several things: Voters approved an 8-mill, five-year property tax increase. City officials got GM to raze its abandoned plant. And the automaker let the city choose a developer – Belvedere Corp. Thus began Norwood’s transformation from blue-collar industrial town to white-collar office and retail hub.

About the reporter:

John Johnston covers eastern Hamilton County communities, Clermont County and the Cincinnati Zoo, and writes about local history.

Email: jjohnston@enquirer.com