Audit: Hempstead Village finances 'reasonable'

An audit of Hempstead Village finances by the state comptroller's office found the locality's budget practices to be sound, but raised concerns that the village planned to exhaust most of its surplus to cover recurring operating expenses.

The report, issued April 15, deemed as "reasonable" the $92.7-million spending plan for the fiscal year starting June 1. The village board voted unanimously to adopt it last Monday, village officials said.

"We found the significant revenue and expenditure estimates in the proposed budget to be reasonable," Deputy Comptroller Steven J. Hancox wrote in the audit. "However, the Village should continue to monitor the revenues and expenditures in both the general fund and the water fund."

The village's general fund has a roughly $6.5 million unreserved fund balance, or surplus. But close to $1 million of it will be used to plug a projected shortfall at the end of this fiscal year, on May 31, according to the comptroller's review.

And another $4.5 million of it was budgeted for 2010-11 to offset expenses and limit the tax increase, village officials said.

With that, the surplus is whittled down to less than $1 million, an amount which "may not provide sufficient resources to meet cash flow needs to finance current operations," Hancox wrote. "Fund balance, as a one-time revenue source, is best used to finance one-time costs, to reduce debt, or to pay for capital costs, and not to pay for ongoing expenditures."

Mayor Wayne Hall said the board of trustees reached bipartisan consensus on the plan to use the surplus because they didn't want to impose an onerous tax hike on residents during tough economic times.

"We didn't want to put double-digit tax increases on residents and burden them any more than was necessary," Hall said."We were blessed for the last three years to have surpluses and for us to just hold it is . . . not in the best interest of the village."

The adopted budget raised the property tax levy by 3.9 percent, and increased the tax rate from $61.53 to $65.12 per $100 of assessed valuation. That means a home assessed at $7,000 will owe $4,558.40 in village taxes, up $251.64 from the current fiscal year.

The report by state Comptroller Thomas DiNapoli's office also drew attention to an operating deficit in the water fund of $1.2 million. Village officials, after installing new water meters throughout most of the village in late 2008 and early 2009, had projected a $600,000 surplus that fiscal year. But due to faulty water meter readings and ensuing refunds, the water fund instead ended that year with a deficit of $252,000, according to the report.

The village board this month approved water rate increases of 22 percent in an attempt to balance that fund, Hall said. The average residential water bill is between $45 and $50 every six months, Hall said, so the rate hikes will cost most people around $20 a year.

State law requires the comptroller's office to evaluate the village's annual budgets until it pays off $4.2 million in bonds issued to cover water and general fund operating deficits dating back to 2005.