The lawmakers also worked out a compromise to save 16 city firehouses slated for closing.
The department sent notices to four firehouses in May that they would be closed as soon as June 22. A dozen others were also slated for closure next year.
Now, all 16 will be saved thanks to a $17 million deal.
"All of us working together took great pains to make sure there are moneys in the budget that will keep all of the fire houses in New York City open," said City Council Speaker Christine Quinn.
One of those firehouses is located in City Island, where residents fought for months to keep it open.
"We wrote thousands of postcards to the mayor," said Barbara Dolemsek. "We sent emails to the mayor. We went to hearings. They had a lot of their facts wrong. They didn't understand the situation here.
In addition to the sales tax hike, the budget agreement includes a resumption of tax on clothing purchases over $110, a new tax on the purchase of electricity and natural gas not bought from a utility, and something called a conformity package that closes tax loopholes.
City services are largely perserved under the agreement.
"I don't think there is any major cut that is going to hurt everybody. There are annoyances. We are not doing quite as much as we all wanted to do," said Mayor Bloomberg.
The state must approve the sales tax increase, along with a few other tax measures.
The legislature in Albany is in turmoil over which party is in control, but city officials don't believe that will affect the budget matters that need approval.
The fiscal year begins July 1. By law the budget for fiscal 2010 must be approved by June 30.
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