SCHENECTADY — The years of tax cuts are over.

Mayor Brian U. Stratton's proposed 2009 budget reverses his two-year effort to cut property taxes in the city, giving residents a 2.9 percent tax hike as well as fee increases for garbage, sewer and water.

The City Council got its first look at the $76.5 million proposal Monday afternoon. It has the final say on the budget, but in recent years has largely approved the mayor’s proposal.

Stratton told the council he could not find a responsible way to cut taxes or hold the line on city fees. The proposed budget already uses two-thirds of the city’s rainy-day fund, leaving Schenectady with just a $2 million cushion. Using the rest to avoid the increase in taxes and fees would be a recipe for disaster, Stratton said.

“I’m afraid that otherwise we’ll wind up right back where we were in 2004,” Stratton said, referring to the deficit the city faced when he first took office. At that time, the city had so little cash that it ran out of money between tax collection periods. For years, the city ended up borrowing money at exorbitant rates to get through those lean months.

Stratton is determined to keep that from happening again.

“We have worked so hard,” he said. “Had everything stayed the same, we could realistically have come in with a very minimal and even no tax hike.”

But the city saw its budget increase by more than $1 million for fuel-related costs while losing about $850,000 in county and state grants. Fuel prices have gone up 68 percent — from $670,000 to $1.1 million. Electricity and gas have gone up too, jumping 23 percent to a total of $2.3 million.

Even salt is more expensive. The cost of all road materials has gone up 34 percent, primarily due to the increased cost of fuel to ship salt to the city.

Only one program has been cut in the mayor’s proposal. He eliminated the 50 First program, which he had announced earlier in the year. He had planned to use $500,000 in surplus to demolish 50 eyesores in the city.

“It’s sad. It’s going to have to be put on the shelf for the time being,” Stratton said. “We can still get there. We have to take a couple steps backward during this troubled time.”

The fund was used this year for two emergency demolitions — a house on Summit Avenue and the Brandywine School — but the $280,000 balance was returned to the 2009 general fund.

He said the money was needed to keep other services available, including free swimming at the Hillhurst and Quackenbush pools. The state Department of Health warned the city that it would not allow either pool to open next summer without major repairs. The mayor added $65,000 to the budget for that work.