Residents of the tiny north shore village of Head of the Harbor are facing a huge tax increase.

The $1.54-million budget proposed by Mayor Natale Tartamella calls for a 9.5 percent tax hike -- far higher than the state-mandated 2 percent cap that takes effect next year.

Tartamella said he had "no choice" because of decreased tax revenue and increases in pension, health and fire protection costs.

"We have a major problem," he said Tuesday.

He said, if approved, taxes would go up $150 next year on the average home assessed at $10,000.

The village board will hold a public hearing on the budget at 7 tonight at Village Hall, 500 North Country Rd., St. James.

The five-member board last month voted unanimously to override the state's 2 percent cap on tax levy increases. Under state law, the cap can be overridden by a 60 percent vote of the governing body of a municipality or district, except for school districts, which require a public vote.

Tartamella said the tentative 2012-13 budget for the village of 1,500 includes no new highway department purchases or police cars. Village employees will receive a 1 percent raise, but for the first time they will contribute 10 percent of their salaries to health care, Tartamella said.

But the cost of services from the St. James Fire Department is expected to double over the next five years, to $207,000 annually from $100,000, he said. Mortgage tax revenue has declined after peaking in recent years at $80,000 per year.

"Now we're lucky to get $40,000," Tartamella said.

Tartamella said sales taxes have declined, and reduced property assessments lowered the village tax base by $100,000.

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