Village climbing out of a fiscal hole

We’re crediting the arsonist for not burning down the whole house.”

Amil Virani, resident

The Village of Valley Stream adopted its budget for the fiscal year beginning June 1 on Monday. The board unanimously passed the resolution at the close of the budget hearing, which allowed residents to ask questions and voice their concerns before the vote.

The new spending plan will increase taxes by roughly $60 to $65 for the average homeowner, according to Village Treasurer Michael Fox. 

This year’s tax levy of roughly $33.1 million is 2.04 percent larger than in the current budget, and did not require the board to pass a separate measure to override New York state’s 2 percent property-tax cap. Fox said that when accounting for changes in assessed value and payments in lieu of taxes, the village stays nearly $67,000 under the tax cap.

In 2016, facing a shortfall of $2.5 million, the board voted to pierce the tax cap, and boosted the tax levy by 6.8 percent. In the current budget, for the fiscal year ending next month, the village increased the tax levy by 4.5 percent, which also exceeded the state cap.

That spending plan took aim at easing financial issues detailed by State Comptroller Thomas DiNapoli, and at recouping revenue lost because of last year’s pandemic-related closures. In a fiscal monitoring report last April, DiNapoli categorized the village as a municipality under “significant fiscal stress.”

At the time, the village had a projected operating deficit of $2.2 million. Since then, however, its finances have been looking up, as improvements in budgeting have steadily chipped away at the deficit. Valley Stream was removed from DiNapoli’s fiscal stress list as of last May 31, according to Fox, and expects to stay off the list in the coming fiscal year.

While the village is no longer under the significant fiscal stress category, it joins eight other villages and cities under "susceptible fiscal stress" for its May 31, 2021 fiscal year. 

The village still has a deficit of roughly $1.2 million in its unassigned fund balance, reflecting years of operating deficits due to unbalanced budgets, which has led to the overuse of reserves or tax hikes to make up for revenue shortfalls. Village officials have in the past cited tax refunds for declining fund balances, but investment agencies such as Moody’s Investors Service have cited numerous other factors, such as a debt service budgeting error in 2016 and an underestimation of employee benefit expenses the following year.

But Fox expressed confidence in this year’s current fiscal trends, anticipating that the fund balance will be “restored” by the end of the fiscal year.

If his financial forecast proves correct, the village may finally reverse course on its currently unfavorable bond rating status. Its current rating from Moody’s Investors Service is Ba1, which is considered an investment liability and leads to increased borrowing costs. On March 5, 2021, however, the agency revised the village’s outlook from negative to stable, citing “modest improvements” in budgeting that have helped it shore up its finances. Nonetheless, Moody’s added that Valley Stream’s prospects for a “return to broadly healthy finances over the next few years are limited.”

In fact, the village’s financial struggles are far from over. Its outstanding debt is $34 million, according to Fox, and despite its bond rating, borrowing will remain necessary to pay for annual expenses such as road repairs as well as building and equipment purchases and renovations. But Fox expects the village to recoup revenue lost from pandemic restrictions, such as fees from the municipal pool and recreation services that were limited by Covid guidelines.

Resident Amil Virani, who posed a series of questions to the board during the public comment section of the budget hearing, said he was “disappointed” with the hearing and unsettled by the lack of public involvement.

“They’re reducing the debt, but they’re not giving us a long-term plan of how we get out of this hole,” Virani said. “And they’re saying they’re going to fix the unassigned fund balance by a certain date, but it should have been fixed a long time ago. And on top of that, they’re raising our taxes. We’re crediting the arsonist for not burning down the whole house.”

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