In other business, the council:
• Voted to prohibit parking on one side of Alpine Street.
• Approved a resolution to donate old turnout gear to Moldova Fire Department in Chimislia, Moldova.
• Voted to impose a $5 processing fee on anyone charged with an offense in the Municipal Court.
• Discussed the possibility of the city taking over the maintenance of the Lake Lanier Olympic venue.
• Went into executive session to discuss pending litigation and real estate acquisition.
The Gainesville City Council voted 4-1 on Tuesday to approve a fiscal year 2012 budget that includes no tax rate increase, furloughs or cuts in services.
The budget will take effect July 1 and will use part of a $5 million surplus to help replenish the city's dwindling rainy-day reserve fund.
"Just in case the property taxes come in lower than we're expecting, we'll have a little fund to fall back on," Mayor Pro Tem Danny Dunagan said. "And if it doesn't, next year we'll be in just that much better shape."
According to Dunagan, the council tries to keep enough money in the reserve to run the city for two to three months. But recent economic hard times have brought the fund down to four weeks.
Under the new budget, the rainy-day fund will be brought back up to six weeks.
Councilman Robert "Bob" Hamrick cast the only vote in opposition to the proposal, saying he thinks money should be given back to the taxpayers instead of increasing the fund.
"I think we ought to revert that back to the taxpayer," he said. "During these economic conditions, I just feel like the taxpayer needs some relief too."
Hamrick also said he feels the reserve fund is already large enough to weather any sort of economic hardships the city may face in the future.
Councilman George Wangemann offered a plan on June 7 to give money back to taxpayers by rolling back the millage rate. Hamrick seconded the motion, but it failed as the three remaining council members voted in opposition.
The council offered a chance for public comment before voting on Tuesday, but no one came forward.
With the passage of the new budget, the tax rate will stay at $2.92 on each $1,000 of taxable property.
The budget also includes $26.7 million in spending, which is an increase from FY 2011's $25.5 million.
Wangemann said Gainesville is in good shape and will be able to keep all its services because officials planned ahead for the economic downturn.
"Two years ago we bit the bullet and made some of the hard choices knowing that hard economic times were here and they were probably going to hang around for a while," he said.
"Fortunately for us we did, because we're not really facing those hard choices like the county is right now. Sometimes you need to plan ahead and look to see what's coming down the pipe."
The council voted unanimously on Tuesday to raise water rates.
Starting in January, water rates will increase by 4 percent and sewer rates by 4.25 percent.
Sewer rates will rise to $7.02 per 100 cubic feet of wastewater, except for Oakwood sewer customers, who will pay $8.31 per 100 cubic feet.
For customers inside the city limits, water rates will rise to $2.37 for the first 100 cubic feet of water used.
Customers outside the city limits will pay $4.74 for the same amount beginning in January.