Council tax payers on Wearside will see a rise of almost 5% in their bill.
The agreement, rubber-stamped by members of Sunderland City Council today, increases the levy by 4.99% and includes a 2% adult social care precept that will raise £1.79 million for more than 4,000 older and vulnerable people who receive care packages.
An extra £1.5 million, alongside £500,000 invested last year, is also going to support environmental services such as street cleaning, and prosecuting litter bugs and fly-tippers.
The Council Tax raises approximately 14% or £90 million of the council's planned spending of £646 million, with the the majority of the budget coming from Central Government grants.
Since 2010, the council has had its spending power cut by a third under the Government's austerity programme as more than £290 million has been taken out of budgets.
The council has also reduced its staffing by more than half to less than 3,000 - a reduction of more than 5,000.
The meeting also saw Councillor Harry Trueman, who has been deputy leader of the council, elected as leader of the council.
It follows the death of Councillor Paul Watson last year and will see him in the post until the Labour group's annual general meeting, which will take place in May.
The decision to elect Coun Trueman was backed by 48 members, with four abstentions and three who voted against.
Councillor Michael Mordey has been elected as deputy leader.
Coun Trueman's appointment was proposed by the council’s Cabinet Secretary Coun Mel Speding and seconded by Coun Mordey.
But it was criticised by Coun Niall Hodson, leader of the Liberal Democrat group on the council.
The Lib Dems had initially said they would propose one of their own members, Grindon and Thorney Close member Coun Stephen O’Brien to the post of Council Leader.
The party even went so far as putting out a press release to that effect just hours before yesterday’s meeting.
Coun Hodson did not actually oppose Coun Trueman’s nomination, but said the time was right for a complete change at the top of the council.
"I simply do not have any confidence in the ability of this core Cabinet to provide leadership for this city,” he said.
He said there was ‘factionalism and bullying’ in the Labour Group and told the meeting: "Given the Labour group cannot trust each other, I don’t see why we should trust them."
Coun Speding said claims of division within the Labour group were “absolute rubbish”.
"I have trust and have full confidence in my fellow Labour councillors to do the right thing," he said.
Coun Trueman said: "The scale of cuts and cost pressures over the last eight years means we cannot fund frontline services to the level we want to.
"We have always tried to protect residents as much as we can, but we continue to face very difficult decisions because of the Government’s year on year cuts to funding.
"The decision to raise Council Tax is one of those hard choices. Not raising Council Tax would mean cutting services even further – including services to the most vulnerable in our city.
"That’s why we have taken the very difficult decision to protect services from further cuts by raising Council Tax for only the third time since 2010."
Coun Mordey, Portfolio Holder for City Services, told the meeting the council was looking to get tough on litterbugs.
"Cabinet, at its meeting at the end of the month, will consider a report that will increase the fine for littering to £150,” he said.
"And we are currently working on proposals that will be brought forward in April that will disrupt even further the activities of fly-tippers in Sunderland."
The budget also sees:
* More than £5 million for supporting Children's Services and an extra £8m (£1.79m from the Council Tax) into adult social care;
* A one-off investment of £2 million to support this year's Tall Ships Event in July;
* An additional £60 million of one-off capital investments in highways, plant and equipment, school buildings and other infrastructure.
Coun Trueman said: "We are investing £14 7million in the city’s infrastructure next year, with a further £13 4 million planned to be spent in the following three years.
"As a council, we are working with the private sector to encourage development and investment.
"The council and all our partners continue to invest in the regeneration of the city with major developments planned over the next few years.
"Work is progressing on the International Advanced Manufacturing Park (IAMP) next to Nissan with the aim of creating over 5,000 quality jobs.
"And Northern Spire clearly demonstrates our aspirations for the city - it is progressing apace and on target for completion in the not too distant future.
"Phase 3 of the Sunderland Strategic Transport Corridor (SSTC) will improve roads running from the new Wear crossing to St Mary’s Way, opening up opportunities for more development on the south side of the river.
"Furthermore, investment in roads and schools infrastructure will support the development of 4,000 new homes in the Sunderland South Growth Area.
"It’s also essential that we continue to invest in our infrastructure and economic regeneration. This is vital if we are to deliver more and better jobs and economic growth and make our city more attractive to residents, businesses and visitors, so that can grow and prosper."
Liberal Democrat and Tory groups both tabled amendments with their own alternative plans, which were defeated.
The Conservative proposals would have seen the Council Tax rise limited to just 3%, with a revenue budget cut of £1,812,000, including slicing £1.5million from street cleaning by establishing a new company to take responsibility for the service, and cutting more than £130,000 from members’ allowances.
The Liberal Democrat proposals would have retained the five per cent rise in Council Tax, but seen an overhaul of the council’s spending, including a £250,000 cut to special responsibility allowances, a £36,000 reduction in councillors’ expenses and subsistence payments and cancellation of more than £3million improvement work at Port of Sunderland.
But opposition councillors clashed over the proposed scale of the Lib Dem’s cuts to allowances and expenses.
Lib Dem leader Coun Niall Hodson said a cut was supported by the council’s own research among council tax payers. "Residents have said they would like to see councillors share the burden,” he said.
But Tory Group leader Coun Robert Oliver said it was necessary to reimburse people for their time and effort in order to ensure a cross section of society was involved in politics.
"If you did not have payments, you would probably only get 600 Jacob Rees-Moggs in the House of Commons," he said.
"One is just fine – 600 is probably not."
And his Conservative colleague Coun Michael Dixon went further, telling Coun Hodson: "There is nobody in this Chamber today other than those who want to work in public service. There are elements of your amendment that suggest people are ‘on the make’ and I completely reject that."
Cabinet Secretary Coun Speding said continued investment in the port was essential: "Are you going to turn a profitable port into a non-profitable port and put people out of work?”
Sunderland's Council Tax remains the lowest in Tyne and Wear.
The council also says its part of the precept, not including the fire and police precepts, accounts for 83p a week for most households in Sunderland, with the majority Band A properties.