Scottsdale officials have proposed a $234.7 million budget for fiscal 2011 that replaces a feared $18 million shortfall with a potential $365,000 surplus.

The budget includes spending cuts, a $6 million reduction in transit spending due to the loss of shared state revenue, and the use of $4.2 million from the city’s surplus fund, but does not call for layoffs or reductions in authorized positions.

The budget plan is up 3% from fiscal 2010. The city anticipates a 2% increase in sales tax revenue during the next fiscal year, for a total of $80.5 million.

Acting city manager David Richert told City Council members last week that Scottsdale is not in a rebuilding mode yet, but the downsizing is over. “While this will be the third straight year of declining revenues, there are some positive signs of recovery,” he said in a letter to.

Last year, the city had to deal with a projected deficit of almost $65 million. Solutions included a major reorganization of city offices, pay cuts for all employees, and a 10% workforce reduction.

Scottsdale’s debt is rated triple-A by all three major rating agencies

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