Los Angeles Mayor Antonio Villaraigosa on Thursday proposed a $4.3 billion budget that includes increases in water rates and residential trash collection fees to fund the hiring of 650 new police officers, new traffic control measures and infrastructure upgrade projects.

The proposed general fund budget, which must be approved by a majority vote of the City Council, is a 10 percent increase from last year’s approved budget and a 4 percent increase from the actual budget, which was swollen with revenues from the region’s sizzling real estate market.

Despite this revenue surge, Villaraigosa said the city still faces a $295 million structural deficit brought on by the dot-com bust and the Sept. 11 terrorist attacks. To help close this deficit, the 2006-07 budget relies on $200 million in revenue transfers from the L.A. Department of Water & Power and $250 million from the city’s reserve fund.

Unlike in previous years, the 2006-07 budget projects a 10 percent drop in the city’s documentary transfer tax (based on the volume of real estate transactions within the city) from current budget year levels of about $214 million. That’s offset by a projected 13 percent jump in property taxes, fueled by a 10 percent increase in valuations and by the implementation of Proposition 1A, which ends the taking of local property tax dollars by the state.

The city’s total business tax take is expected to remain unchanged at about $421 million. While a relatively robust economy has led to larger gross receipts at area businesses, that is offset by the second year of rate cuts as part of the city’s business tax reform program. The rate cuts are projected to range around 4 percent.

The budget also relies on a 5 percent increase in retail sales taxes and a 9 percent jump in hotel bed taxes.

On the spending side, besides spending $33 million to hire up to 650 new police officers, Villaraigosa’s budget allocates $100 million for the city’s Affordable Housing Trust Fund.

The budget also allocates $10 million for plan checks at the Department of Building and Safety, and $1.1 million to fund seven additional positions in the expedited case review section of the city’s planning department. That’s designed to help speed development projects through the approval process.

Villaraigosa’s budget also spends millions of dollars to improve traffic flow throughout the city, including $16 million for signal synchronization, $1.1 million for a “traffic tiger” team to remove parked cars from streets during rush hour and $55 million on various street widening and reconstruction projects.