As part of the budget process, the mayor and the board of trustees of the Village of Mineola held its budget hearing last week. The mayor and the board has until the end of the month to pass a budget for the 2003-2004 fiscal year and are in the process of finalizing a budget proposal that the board will vote on.

The proposed budget, as of the budget hearing on Monday, April 14, reflected a 13.1 percent increase over last year's budget. However, the increase is now expected to be closer to 13.7 percent.

Although residents can expect a double digit tax increase, the village's budget for the 2003-2004 fiscal year contains key provisions Mayor Jack M. Martins believes will help ensure solid fiscal health for the village now and in the future.

One such provision is increasing the line for tax certiorari payments from $450,000 to $700,000 so the village no longer has to bond for refund payments to taxpayers who successfully challenge the assessments.

The proposed budget also contains provisions to convert the village's short-term debt to long-term debt in order to lock in low interest rates. It also contains the provision to return the Sewer Fund from the Water Fund to the General Fund to protect the solvency of the water fund.

A main priority of Mayor Martins is addressing the village's debt. The village currently has approximately $33 to $34 million of debt. Of that $33 to $34 million, $19 to $20 million is in short-term Bond Anticipation Notes (BANS). This year, the village is required to roll over $5 million of the $19 million to $20 million of its short-term debt into long-term bonds. Next year, the village will be required to roll over approximately $6 million. The year after that, the village will be required to roll over another $5 million.

However, Martins is attempting to address the village's debt now by taking advantage of interest rates that are at their lowest since 1958 and rolling over all of the $19 to $20 million that is in short-term debt into long-term debt. Interest rates are expected to go up in the future so by converting all of the village's short-term debt into long-term debt now, the village is locking in the low interest rate, which is approximately 4.25 percent.

If the village were to convert only the mandatory $5 million of its $19 to $20 million of short-term debt into long-term debt, it would cost the village $130,000. If the village were to convert all of its $19 to $20 million of short-term debt into long-term debt, it would cost the village $280,000, which means an additional 1.8 percent tax increase.

However, if the village waits to convert all of the short-term debt into long-term debt, it runs the risk of having to pay back money at higher interest rates if interest rates do, in fact, increase in the coming years.

"Either we can do it now or we can do it a year from now. We're going to do it. There's no question. The debt has already been incurred. It's already on the books. We're paying it at a reduced rate, but we're going to have to convert it this year, next year and the year after that," Mayor Martins said of the village's short-term debt. "We're trying to project where the interest rates are a year and two years down the road when everyone is telling us they're going to be higher."

If the village bites the bullet now and converts all of its short-term to long-term debt now, it could very well benefit financially in the future by locking in a low interest rate as opposed to waiting to convert the short-term debt until next year and the year after when experts predict interest rates will increase. However, some residents may have a hard time swallowing a tax increase of over 13 percent.

Mayor Martins though believes that by following the advice of the village's financial planner and village treasurer to lock in all of the village short-term debt to long-term debt now while interest rates are their lowest in 45 years, the village will save money in the long run. The decision may cause village taxes to increase further this year, but the mayor believes it is the right decision to ensure future fiscal stability.

Another major initiative of this year's budget is transferring the Sewer Fund out of the Water Fund and into the General Fund. The purpose there is a projected shortfall in the Water Fund because the board has taken the position that it will not bond for non-capital expenditures, according to the mayor.

One non-capital expenditure is the renovation of the village's water wells. The village wells are on a seven year cycle so that one is repaired every year. "We have bonded for them in the past. We're not going to do so this year," Mayor Martins said.

The Sewer Department is currently being paid for out of the Water Fund. Prior to 1999, the Sewer Department had been paid for out of the General Fund. "We're proposing to move [the Sewer Department] back into the General Fund, where, in my opinion, it should be so that we allow the Water Fund and the monies that are paid by village residents for water to be dedicated solely for water and that is maintaining our infrastructure, repairing and maintaining the system and allowing that fund to develop and not pay for things that aren't necessarily water related," Mayor Martins said.

In order to make the Water Fund solvent, Mayor Martins believes the village will have to either raise water rates again or remove the Sewer Department and put it back into the General Fund. The mayor is against raising water rates since they were raised recently.

As of Monday, April 21, the proposed village budget amounted to a 13.7 percent tax increase with several factors leading to the increase such as increasing the line for tax certiorari payments that accounted for an additional $250,000 in the budget. Also, in last year's budget, there was a piece of property that was sold to the MTA for $134,500. The village will not have that revenue this year. A loss of assessed valuation accounts for $122,000 less in revenue. A state mandated additional contribution to the New York State Retirement system accounts for an additional $160,000 in the budget. The increase in the cost of liability insurance accounts for an additional $63,500 in the budget. The assumption that contractual labor costs will go up also will account for an increase in the budget. Transferring the Sewer Department out of the Water Fund and into the General Fund accounts for an additional $285,000 in the budget and the conversion of village debt from short-term to long-term debt accounts for an additional $280,000 in the budget. An increase in sanitation disposal fees caused a budgetary increase of $70,000. A increase in workers compensation expenses caused a budgetary increase of $80,000 and the costs of the village's Empire health insurance caused an increase in the budget of $89,000.

Although those expenses translate into a village tax increase of 13.7 percent, Mayor Martins believes that the proposed village budget for the 2003-2004 fiscal year will put the village on solid financial footing. Since the mayor is against borrowing for non-capital expenses to balance the budget, the proposed 2003-2004 budget also puts an end to that practice while addressing the debt the village already has, according to the mayor.

"There are really only two ways to look at this document," the mayor said of the budget. "If you go on the assumption that you're not going to borrow and we're not, then there are only two ways of handling it and that is either to cut expenses significantly or increase taxes."

Mayor Martins said the board would continue to look for ways to cut spending. However, the mayor has made it known that he will not look to make cuts that will compromise the village's services. Increasing taxes, therefore, is the only other alternative. "This board is going to continue to work. We will have work sessions right through the end of this month but the sad alternative and the reality is that we cannot defer tax increases indefinitely and we cannot hide tax increases by borrowing money and just putting things off. It has to come to a head," Mayor Martins said. "I firmly believe that the budget as proposed handles a number of different things. It adds stability. It does away with all of the borrowing. It handles our long-term debt responsibly because, we don't have to worry about, in the back of our minds, what interests rates are doing going forward. It allows us to the opportunity to fix those costs now."