When John Hawkins was a youngster growing up in a black neighborhood in this gritty Navy town, he would watch from the school bus window as he was whisked past schools in white neighborhoods and taken to a segregated black elementary school.

By the time his daughter, now 10, was ready to start school, Norfolk's school board had begun busing for different reasons.

Now the buses stop in both black and white neighborhoods, busing children of both races across town to help achieve a more balanced population in the schools.

"That gave us equal education," said Hawkins, leaning across the counter of the corner grocery store he runs on the edge of a predominantly black neighborhood in the southern end of the city.

Hawkins and other black parents now say they fear that this week's federal appellate court ruling upholding a plan to end busing of elementary school pupils here could reverse a generation of progress in desegregating schools.

But while many black parents and community leaders have condemned the court decision as a doorway for resegregation, some of the city's top business and political leaders hailed the ruling as a window for revitalizing old inner-city neighborhoods and renewing public enthusiasm for the city school system.

Since the implementation of cross-town busing in 1970, Norfolk business leaders have watched the economic health of the city slide as middle-class families moved to neighboring Virginia Beach -- one of the fastest growing areas of the state.

"The stability this change will give us will be very valuable," said Josh Darden, a member of the Greater Norfolk Development Corp., a group of powerful business leaders with strong influence in city politics. "A number of areas will start to come back -- not as much with the racial mix as with the economic mix. We want the middle-class people a city is built on."

For Joan Gifford, who runs one of the city's largest real estate agencies, it means she may no longer have to watch newcomers brush past her Norfolk house listings in favor of her houses in other suburban school districts.

"They've heard long before they arrive here: We do have busing," said Gifford, who has been selling houses in Tidewater for 33 years. "It's been a definite detriment to the housing market here, especially for families with young children."

The bitterness over school busing in Norfolk is a microcosm of the debate that has divided communities across the nation. For that reason, the long-awaited ruling by the 4th U.S. Circuit Court of Appeals could have broad implications for school desegregation law nationwide, legal scholars say.

The court ruled that 15 years after Norfolk integrated its school system under a court-ordered busing plan, the city has eradicated "all vestiges of . . . segregation" and should be allowed to dismantle the busing program.

The courtroom battles may continue, with black parents who filed the suit against the return to neighborhood schools saying they will appeal the decision.

But many officials are calling for the School Board to stop cross-city busing for elementary school pupils with the end of this school year.

If the neighborhood school plan is used next year, 10 of the city's 35 grammar schools will have black student enrollments of at least 98 percent.

This year, the highest black student enrollment at any elementary school is 78 percent.

For St. Helena Elementary School, a cheerful looking modern building that sits in the shadows of Navy battleships on one side and a large government housing project nearby, black student enrollment would leap from 62 percent to 100 percent.

"Not mingling with whites at that early age is going to hurt the blacks," said Ella Hines, a black woman whose grandchildren attend Norfolk public schools. "At an early age, they're already going to be learning, 'We're not supposed to have to deal with whites.' "

But not all black parents are against the change.

"I've never been one for busing anyway," said Clifton Carr, whose 10-year-old daughter rides a bus to her fifth grade classes at a school where black student enrollment will drop from 52 percent to 34 percent if the neighborhood school plan is implemented.

Black and white parents say they expect the return to neighborhood schools to inject new life into the city's weak parent-teacher associations, where membership plummeted from 20,000 to 3,500 after cross-city busing began. Although memberships have increased slightly, school officials say only a few parents attend some of the meetings because of the long drives they have to make across town.

While city business leaders are eager to use the return to neighborhood schools in their efforts to rejuvenate an aging city dominated by the massive military complex that surrounds it, few of them argue that it will restore the city to the dominance it once held over Virginia Beach. With more than 400 square miles of incorporated city property, Virginia Beach has a population of more than 343,000, compared with Norfolk's 266,000 residents.

"It triggered the growth in Virginia Beach rather than Norfolk," said real estate agent Gifford. "The growth occurred quicker there than it would have had this busing not occurred."

Within 10 years, Norfolk's overall population had dropped 11 percent and school enrollments had plunged 37 percent. While the white population in the city had declined 24 percent, white student enrollment in public schools went down 52 percent.

The School Board, predicting that 75 percent of the students attending the schools would be black by 1987, said it proposed a return to neighborhood schools to stem white flight.

Plaintiffs in the lawsuit against the School Board argue that white student enrollment has stabilized, and the 59 percent black student enrollment in the school system this year is far short of those early projections.

Even those who endorse the court ruling warn that school and city officials will be closely scrutinized if the busing program is discontinued.

An editorial in today's editions of the Virginian-Pilot newspaper said: "The [School] Board must make it clear, as it has before, that racial discrimination will not be tolerated and that predominantly black schools will not be shortchanged in any way."

But some blacks believe that the end of busing and equality are not compatible. "We should continue to be educated together," said Hawkins. "I don't think we'll get the same treatment if you have all blacks in one school and all whites in another."