Hempstead budget could draw down $50 million in reserves, keep levy flat

Hempstead Town Supervisor John Ferretti’s first budget plan would keep tax levies essentially flat in 2026, but draw down up to $50 million in reserves, according to officials and budget documents.

The 2026 budget proposes a 0.1% levy increase to $389.3 million from $389 million, according to the spending plan.

In 2025, the town’s total tax levy rose 12.1% over the previous year, piercing the state tax cap for the first time.

"I'm intently focused on preserving our community's suburban dream of an affordable quality of life," Ferretti said during a news conference on Thursday. "Hempstead Town is home to generations of families and we work hard to keep costs as low as possible so families can afford to live here."

Town spending under the plan would increase to $576 million next year, up 4.9% or $26.5 million. The town would draw down on the town’s fund balances, also called reserves, a practice that Moody’s Investors Service warned against last year.

“Based on our fiscally conservative revenue projections, at most, this budget would draw down around $50 million in reserves,” town spokesman Brian Devine said in an email on Friday. Devine said the town expects to implement cost-cutting measures so it may not need to dip as much into reserves. 

Last year, Moody’s warned that by continuing to draw down reserves the town could risk its Aaa bond rating. The Wall Street credit rating agency said in a May report that Hempstead's finances had stabilized after implementing a tax increase for this year. The report also cited the replenishment of reserves.

“Given that reserves as a percentage [of the budget] are already below average for the Aaa rating, maintenance at or above the current level will be a key credit factor moving forward,” the Moody’s report stated. Credit ratings affect the interest rates that municipalities pay when they borrow money.

But Ferretti said revenues could come in higher than projected next year and predicted a "balanced budget."

“A budget's a living document, and we will certainly see where the revenue comes in, but we anticipate we increase sales tax and other things that will make this a balanced budget,” Ferretti said.

Ferretti highlighted a 17.9% cut to the general fund tax levy.

"The Town of Hempstead residents are going to see real money in their pockets," he said.

The tentative budget will be formally introduced during a town board meeting on Tuesday. The town board could vote to make the plan Hempstead's preliminary budget. Ferretti said he expects the budget to be formally adopted on Oct. 16 following public hearings.

The proposal would reduce the tax levy in the general fund, but rely more heavily on reserves to close a spending gap. The plan calls for drawing down $35.5 million in general fund reserves, according to budget documents. The adopted 2025 budget called for using $16.3 million to close an operating deficit in that fund.

The board appointed Ferretti, a Republican, town supervisor during an Aug. 5 town board meeting. The incumbent, Donald X. Clavin Jr., had resigned abruptly earlier in the meeting. The board reappointed Ferretti to the seat on Sept. 16 after the Democrat running against him, Joseph Scianablo, filed a lawsuit challenging the legality of Ferretti's appointment.