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Rockville finance staff on Monday presented the City Council with an operating budget that holds the line over last year and a property tax rate that remains the same.

In keeping with the "belt-tightening" approach City Manager Scott Ullery has promised since last fall, the fiscal 2010 operating budget is recommended at $102.2 million, a decrease of 0.5 percent, or $500,000, from 2009.

Ullery previously warned that unless the city began tightening its belt, its expenditures would exceed its revenues in five years under the hostile economic climate.

However, Ullery said he is waiting on pending state legislation that could reduce some of the city's revenue in highway user fees and income taxes.

"We do expect this budget to be balanced," Ullery said. "It's going to require more reductions in expenditures."

The fiscal 2010-2014 capital improvements program includes $28.9 million in new construction for a total of $62.6 million for 63 projects. The three major projects include the renovation of the Old Post Office at North Washington Street and West Montgomery Avenue into a new police station, the modernization of the Gude Drive Maintenance Facility and expansion of the Senior Center on Carnation Drive.

Budget finance officer Stacy Tate said 13 construction projects were reduced, deferred or eliminated this year, saving $6 million.

Given the flattening or decreasing revenues, city staff does not recommend another cut in the property tax rate. The council approved a one-cent reduction in the property tax rate in each of the last three years. Rockville residents currently pay 29.2 cents per $100 of assessed property value, which is where it would remain under the proposed budget.

However, there may be other opportunities for tax credits. The recommended budget includes a one-time $42 credit for every owner-occupied house, which is down from last year's $100 credit.

The city will continue offering the state-administered Homeowner's Tax Credit Program with expanded parameters over last year. Now, households with gross incomes up to $85,000 per year and net worth of less than $150,000 could receive tax relief on the first $400,000 of assessed value of their home.

An additional 25 percent tax credit is available for senior citizen homeowners who are 70 years old or older.

Homeowners could also begin paying more. Water rates will increase by 25 percent in fiscal 2010 to $2.78 per 1,000 gallons for the first 12,000 gallons per quarter. That rate goes up to $4 for the next 12,000 gallons and $4.30 for more than 24,000 gallons of water per quarter.

Sewer rates are recommended to increase by 3.8 percent to $4.12 per 1,000 gallons.

Residents will begin to pay a stormwater management fee of $61.85 per equivalent residential unit (ERU), which is the average household. Larger commercial buildings could equal more than one ERU. The fee would pay for the rehabilitation of the city's beefed-up stormwater management program that began last year. The council decided to delay charging residents the fee one year.

Three public hearings on the city's fiscal 2010 budget will be held at City Hall on March 30, April 13 and May 4. The council's budget worksessions will be held April 20 and 27. Budget adoption is scheduled for May 18.