MASTIC BEACH, N.Y. (CBSNewYork) — Residents of Mastic Beach, Long Island, had high hopes when they formed a village in 2010. They hoped to clean up blighted homes and the image of the struggling community on Suffolk County’s South Shore.

But as CBS2’s Carolyn Gusoff reported, there is trouble in the newly proclaimed “paradise.”

The village of only 13,000 people has big budget problems. Already in the red, officials accidentally overspent on repaving a road — an accounting error that cost nearly half a million dollars.

“It’s not fair,” one resident said. “Why should we pay (for) their mistake?”

How to pay for the mistake has had angry residents packing Village Hall to rally against a proposed 125 percent tax hike.

So instead of more than doubling village taxes, officials have passed a new budget with deep cuts.

Elected trustees will give up salaries and their village cellphones, and there will likely be layoffs.

“They are gutting our staff, and quite honestly, we are going to be suffering for a lack of services,” said Mastic Beach Village Mayor Maura Spery.

There’s also talk of new fees on merchants.

“We’re trying to make the neighborhood better here, and then we’re going to pay more taxes?” said merchant Ralph Marinelli.

There have been calls for the mayor’s impeachment.

“They need to be fired,” one man said. “They need to be replaced.”

Resident Rob Miller says he has a better idea: He is gathering signatures for a referendum to dissolve the village.

“We don’t need a village,” he said. “The people in charge have overspent the budget. They’ve overspent what they had to spend.”

Some residents hope to hold a vote on the referendum in November.

But Spery says residents had unrealistic expectations if they thought taxes wouldn’t go up after adding a new layer of government.

“It’s absurd,” she said. “Of course, you have a village government, it costs more. There’s not one village government in New York state that doesn’t cost more.”

She said to let the voters decide if the village survives the accounting error.

The village treasurer resigned over the incident, and Spery says she has taken full responsibility.