The Village of Mineola has a budget for the 2003-2004 fiscal year as Mayor Jack M. Martins and trustees Larry Werther and Steve Franzini passed it with a 3-2 majority. The two negative votes came from trustees Lou Santosus and Linda Fairgrieve.

The budget represents a 13.8 percent tax increase over last year's budget. Mayor Martins said he is proud of the document and stands behind it.

According to Mayor Martins' budget presentation that was held at the April 30, 2003 budget work session, the 2003-2004 budget with its 13.8 percent tax increase will ensure healthy, balanced future budgets, ends borrowing for non-capital expenses, allows the village to establish and maintain a healthy unreserved fund balance in both the General and Water Funds and begins paying down the debt as opposed to presenting taxpayers with an ever increasing debt burden.

However, the mayor's opinion was not shared by Santosus and Faigrieve. Santosus said he would have preferred an increase of 7 to 8 percent. Santosus said that with the economy the way it is and with other taxes going up, if the village has the opportunity to keep its taxes in line they should do so.

Mayor Martins said he doesn't believe the village budget's tax increase is too high since it is necessary to ensure fiscal health. "It is what it is. These are the issues we need to address. These are the expenses we have to absorb this year," he said.

The mayor was referring to the items in the budget that caused the increase such as an additional $250,000 allocated to make tax certiorari payments to taxpayers who successfully challenge their assessments. Other items that account for the tax increase include discontinuing to rely on one-shot revenues such as the sale of land to balance the budget. Last year, $134,500 was put into the budget from the sale of a strip of land to the MTA. The village will not have that revenue this year. In addition, liability insurance, workers compensation and health insurance expenses have all increased. The village's contribution to the New York State Retirement System, a state mandate, has also increased. The village's loss of $700,000 in assessed valuation contributed to the tax increase as did the increase in sanitation disposal fees and the projected increase in labor costs.

The other increases such as conversion of short-term debt to long-term bonds and the removal of the sewer department from the Water Fund to be put back into the General Fund the mayor believes were necessary to address the village's $34 million debt and preserve the solvency of the Water Fund.

Fairgrieve and Santosus both voted against the proposed 2003-2004 budget because they felt the 13.8 percent tax increase was too high. "It's just too overwhelming for everyone. You're just hurting people too much," Santosus said.

"We have to address these things. That's our responsibility. If we want to run and be elected and do our job, then we have to address these things in the real world. We don't have the luxury of saying [the tax increase] is too high. What does that mean? What is the alternative if it's too high?," said Mayor Martins.

The mayor asked the two trustees for alternatives to offset the increase. However, he did not believe the alternatives were viable.

Among the initiatives present in the 2003-2004 budget that accounted for the increase were increasing the budget line for tax certiorari payments by $250,000 to $700,000, which is the amount expected to be paid out in settlements for people who successfully challenge their assessments. Mayor Martins has been against borrowing for non-capital improvement expenses such as tax certiorari payments. By fully funding the line, the village will not have to borrow money to pay for the settlements as has been done in the past. This initiative accounted for 2.66 of the 13.8 percent tax increase.

Santosus and Fairgrieve would have preferred to increase the line only to $500,000 and $550,000 and then borrow for the rest of the payments.

Another major initiative was locking in the village's $20 million in short-term debt into long-term debt. The village is obligated to convert $5 million of its short-term debt into long-term, 20-year bonds. However, Mayor Martins believes it is more fiscally responsible to convert all of the short-term debt to bonds now while the interest rates, at approximately 4.25 percent, are the lowest they have been since 1958. By waiting to convert the rest of the short-term debt, the village runs the risk of having interest rates increase. This initiative accounted for 2.99 percent of the13.8 percent tax increase.

Trustees Santosus and Fairgrieve believe the village should convert only the mandated $5 million from long-term to short-term debt and then see if the interest rates do in fact go up.

Most of the debt that was incurred in recent years came from major improvement projects to the village. "A lot of that debt, when you look around the village, you can put your hands on it," Santosus said, referring to the two new firetrucks purchased by the village, the renovated library, the renovated MAA and Wilson Park fields, the pool, the new village hall and the hockey rink. "A lot of that debt was infrastructure debt."

The mayor said he doesn't argue that some of the debt incurred was to make capital improvements to the village, but believes the debt cannot be deferred anymore and the village must come to terms with it.

In addressing the village's $34 million debt, approximately $20 million of which is in short-term bond anticipation notes, the mayor said he believes the advice of the village's financial advisor that interest rates will go up. Therefore, the village is acting responsibly by locking in all of the village's $20 million in short-term debt now at a 4.25 percent interest rate before the rates do go up, the mayor feels.

The mayor pointed out though there was debt incurred that wasn't used for capital expenses such as tax certiorari payments. The mayor was also referring to a practice in which he believes excess money was borrowed for capital improvements but was put in the General Fund to offset tax increases. The mayor believes the practice of borrowing for expenses in the budget that aren't related to capital projects must stop now if the village is to improve its future financial picture. "I know borrowing isn't the answer," the mayor said.

Another major initiative of the budget is transferring the expenses for the operation of the village's sewer system out of the Water Fund, which is funded by water rates, and into the General Fund, which is funded by taxes.

Prior to the 1999-2000 budget, sewer operations were part of the General Fund. However, they were transferred into the Water Fund for the 1999-2000 budget. Mayor Martins believes the reason was to hide a tax increase. The 1999-2000 budget called for a 11.8 percent tax increase. However, if sewer operations were not taken out of the General Fund and put into the Water Fund, the tax increase would have been 14.95 percent.

The danger of putting sewer expenses in the Water Fund is overburdening the Water Fund so that there could be an eventual shortfall in the Water Fund. A shortfall would have to be combated with either a raise in water rates or borrowing. Mayor Martins is currently against raising water rates since water rates were recently raised. Raising water rates to pay for sewer expenses can also be viewed as another way of hiding a tax increase by deferring an expense some feel should be paid with tax dollars. The mayor has also emphasized he will not borrow to offset the cost of producing water.

Trustee Santosus believes that the bottom line is residents shouldn't be hit with a 13.8 percent tax increase during difficult economic times. "I'm opposed to tax increases. If your name was John Colbert and you came up with a 13.8 percent tax increase, I wouldn't be passing it. I would never go for a tax increase of over 7 or 8 percent," Santosus said.

Mayor Martins told Santosus that the trustee has in the past. The mayor pointed out that the tax increase for the 1999-2000 budget was 11.8 percent and would have been 14.95 percent if the board didn't shift the sewer department into the Water Fund, where it was paid for with water rates as opposed to taxes.

Santosus suggested three changes to the proposed budget that would lessen the 13.8 percent tax rate. Santosus suggested easing the burden on taxpayers by not funding the tax certiorari line to the full $700,000. The line in the 2002-2003 budget is funded by $450,000.

However, if the line isn't funded to the full $700,000, the amount the village expects to pay out for the fiscal year, and is only funded to $450,000, as it was in the 2002-2003 budget, then the village would have to borrow $250,000 to make the payments on the tax certiorari settlements. Mayor Martins pointed out that borrowing the money would end up costing the village more in the long run because of interest that has to be paid when the village borrows money.

Santosus also suggested keeping the sewer department in the Water Fund. Santosus believes that people can save money on their water, if they choose to conserve it. However, taxpayers have no choice if sewer expenses are paid out of their taxes. Putting the sewer expenses back into the General Fund accounts for an increase in the General Fund of $265,000, which translates into a 2.82 percent tax increase.

However, according to village treasurer Richard Dwyer, keeping sewer expenses in the Water Fund would create a $259,000 operating deficit in the Water Fund.

In order to offset that deficit, the village would either have to raise water rates or borrow money. Mayor Martins isn't considering raising water rates because they were recently raised and would not save taxpayers money since residents would be paying for sewer expenses through water rates as opposed to taxes. Borrowing, the mayor believes, is irresponsible since it would add to the village's debt and the village would have to pay interest on the money it borrowed.

Mayor Martins also pointed out that senior citizens and firefighters also benefit from a tax exemption on their village taxes, but do not on their water rates. Santosus, however, doesn't believe that savings is significant enough to move sewer expenses to the General Fund.

Santosus also suggested not converting all of the $20 million in short-term debt into long-term debt and only converting the required $5 million. The village could then convert more of the short-term debt into long-term debt when the economy improves.

According to Dwyer, the cost of converting $5 million of short-term debt into long-term debt is $134,000, which would translate into a 1.4 percent tax increase. The cost of converting all of the village's $20 million in short-term debt into long-term debt is $281,000, which translates into a 2.99 percent tax increase. Mayor Martins feels that for an additional 1.6 percent increase on the budget, it is fiscally responsible to convert all of the short-term debt to long-term debt now while interests rates are at 4.25 percent since the village's financial advisor is predicting interest rates will not get any lower.

Despite the two negative budget votes, Mayor Martins maintains that there is nothing within the budget that is fiscally irresponsible. However, the mayor cannot say the same about budgets in previous years.

Mayor Martins believes past budgetary practices were major reasons for the 13.8 percent tax increase in the 2003-2004 budget and would have restrained future boards from making necessary improvements to the village unless they were put to an end this year.

Among the past practices that the money alluded to during his budget presentation were borrowing money to balance the budget, over-borrowing money and putting the excess in the General Fund, transferring sewer expenses into the Water Fund and deficit spending.

In his budget presentation, Mayor Martins pointed to how past practices in recent years have threatened the village's fund balance, which, he pointed out, should be approximately 5 to 10 percent of the total budget.

For a budget of approximately $16 million, which is approximately what the Village of Mineola's is, the fund balance, which is essentially the village's savings account, should be between $750,000 and $1.5 million.

The mayor pointed out in his budget presentation that if past practices of transferring sewer expenses into the Water Fund, borrowing tax certiorari payments and transferring money borrowed into the General Fund, tax increases would have been higher in recent years. The budget presentation showed that in the 1999-2000 budget, if the village did not transfer sewer expenses into the Water Fund, did not borrow $627,000 for tax certiorari payments, and did not transfer $64,500 into the General Fund from money that was borrowed for capital improvements, the budget increase would have been over 20 percent instead of the 11.8 percent tax increase taxpayers saw that year. Also, if these practices did not take place, the village would have had a negative fund balance.

A questionable past budget practice the mayor alluded to was borrowing more money than was needed for certain capital improvement projects and then transferring the excess money into the General Fund to offset tax increases. The 2001-2002 budget, for example, called for an 8.65 percent tax increase. However, in addition to keeping sewer expenses in the Water Fund at a savings of $279,450 to the General Fund, the village also transferred $537,401 of money that was borrowed for capital projects into the General Fund. Of the $537,401 that was borrowed, $151,000 came from money that was borrowed from the firehouse project and $185,000 is from the library project.

The fund balance for that fiscal year was $442,814. Had the village not transferred $537,401 of borrowed money into the General Fund, it would have achieved a negative fund balance. "This village would not have had the money to pay for payroll for personnel. At some point toward the end of that fiscal year, we would have run out of money," Mayor Martins said.

Mayor Martins believes the budget for fiscal year 2003-2004 does away with the need to borrow money to balance the budget and helps to eventually build a fund balance. In the case of tax certioraris, from the 1999-2000 budget to the 2002-2003 budget, the village borrowed $2,192,000 for tax certiorari payments. There is no borrowing for tax certiorari payments in the 2003-2004 budget that was just passed since the line in the budget for tax certiorari payments was increased to $700,000, causing 2.66 percent of the 13.8 percent tax increase.

Santosus didn't agree with all of the numbers that were presented in the mayor's budget presentation and didn't agree that the fiscal situation in Mineola was as bad as portrayed.

Former mayor Colbert defended the fiscal situation under his administration and said that it is unrealistic to believe that if the village's financial picture was so bad, a 13.8 percent tax increase fixes it. Colbert also believes the tax increase is too high and stands behind the budget he presented on March 31,which called for a 4.97 percent tax increase. "People deserve to keep the money they make and not give it to government," Colbert said.

Although Mayor Martins said he doesn't like to raise taxes, the 13.8 percent tax increase, he believes, will put the village on the road to fiscal stability by doing away with the practice of borrowing so that the village can address its $34 million in debt and establish a healthy fund balance.

The village's estimated fund balance at the end of the 2003-2004 fiscal year is expected to be anywhere from $160,000 to $210,000. The goal would be to build that balance up in future years so that it is in the recommended $750,000 to $1.5 million range.

Although the 2003-2004 fiscal year budget addresses issues the mayor believes are important to fiscal health, taxes will be increased in the village. For senior citizens who have the village's senior citizen tax exemption with a home assessed at 5,000, the tax increase will amount to $55.50 for the year or $4.63 per month. For a senior with an assessed valuation of 5,600, the increase will be $62.16 for the year or $5.18 per month. For a resident with an assessed valuation of 5,900, the tax increase will amount to $130.98 or $10.92 per month. For a resident with an assessed valuation of 8,000, the tax increase will amount to $177.60 for the year or $14.80 per month.