Toronto Mayor David Miller says proposed residential and business tax increases may not be as high as first announced. (Canadian Press)

Toronto Mayor David Miller announced Wednesday that the planned 2010 residential property tax increases won't be as severe as first announced.

In early February, when he released his draft version of the city's operating budget for 2010, Miller said property taxes would rise by four per cent this year.

But new, updated numbers, show the city is in a better financial position than first thought.

"Due to prudent fiscal management the city can have a balanced budget for 2011 and a tax increase this year lower than previously estimated without major cuts to services," said Miller during a morning news conference at City Hall.

In February the city estimated it would have an estimated $250 million surplus. Those figures have now changed and Miller says the actual surplus will now be more than $350 million.

Miller is recommending that the new-found money be used to reduce the previously announced residential property tax increase from four to 2.9 per cent. The 1.3 per cent business tax increase announced last month would also be trimmed to less than one per cent.

The mayor, who is in the last few months of his term, said he was also advising that not all the money be spent this year.

The majority of the money — 75% — should be put into a reserve fund "that will allow for a balanced 2011 operating budget with no TTC fare increase — assuming, of course, a three per cent tax increase that year - and the successful conclusion of the agreed upon negotiations with the province regarding its long-awaited resumption of the sharing of TTC operating costs," he said.

The extra money came from a variety of sources, said Miller. "Including cost containment measures implemented by the city manager in 2009 to build a surplus to offset 2010 pressures. Wage constraint on management and front line staff. Higher than expected interest in investment earnings ... parking revenues ... increases in supplementary taxes ... and a reduction in assessment appeals."

Miller's plan to use the surplus will be discussed by the city's budget committee at its next meeting on March 12.