CHICAGO — Indianapolis Mayor Greg Ballard unveiled what he called the triple-A rated city’s tightest budget in years, offsetting falling revenue by dipping into funds from the city’s lucrative downtown tax increment finance district.

The $1.05 billion all-funds budget covers Indianapolis and Marion County, which operate as a single government. The general fund budget totals $570 million, down $3 million from the current spending plan.

The City-County Council will vote on the budget Oct. 17.

Ballard proposed no new borrowing or taxes. He expects to continue to finance an ambitious infrastructure improvement program with $425 million the city will receive later this month after it sells its water and sewer systems to a nonprofit utility.

Ballard has also proposed setting aside $80 million from the deal’s proceeds to create a fiscal stabilization fund whose sole purpose will be maintaining the city’s prized top rating.

The spending plan proposes taking $40 million from the coffers of the city’s main TIF district, a sprawling area that includes most of the downtown.

“For many years, Indianapolis and Marion County have supported downtown Indy,” Ballard said in a statement. “The downtown is strong and can now give back. Even after this, the TIF will have more than enough to cover debt service obligations as well as future economic needs for the city.”

In addition to the $40 million from the TIF surplus, the budget asks for $4 million from the Indianapolis Capital Improvement Board to help cover security costs associated with Super Bowl XLVI, which will be held in Indianapolis next February.

The CIB, which runs the city’s sports stadiums and convention center, was in the red until last year, when the city and state stepped in with a tax increase and loan package.

The budget trims $20 million from all city-county agencies except public safety. Most of the cuts will come from the attrition of 200 employees.

No layoffs are planned under the spending plan.

Like political subdivisions across the state, Indianapolis is suffering from declining property tax revenue due to a 2008 state law that put a cap on property tax rates.

The city and county are also grappling with falling income tax revenue. Projected 2012 income tax revenues are down $85 million, or more than 30%, from their peak in 2010, according to budget documents.

The falling revenues coupled with rising obligations create a $64 million structural imbalance heading into 2012, the city said.

“The upward trajectory of fixed costs such as contractual raises, health insurance coverage, municipal pension benefits, and fuel completes a triad of fiscal factors converging in 2012,” documents said.

Ballard faces his first re-election bid in November.

He faces Melina Kennedy, a former public finance attorney at Baker & Daniels LLP and deputy mayor of economic development under former Mayor Bart Peterson.

Kennedy released a statement that said the spending plan is “not honestly balanced and fails to adequately address the core critical issues facing Indianapolis — improving education, fighting crime, and growing jobs.”

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