The increase of 1.99% for Plymouth City Council is the maximum possible without triggering a local referendum.
The budget presented at the Labour-led council for 2015-16 was approved by a margin of one vote.
Councillors also approved £3.5m plans to upgrade the city's Pannier Market and shop fronts.
A council tax rise of almost 2% and a £3.5m city centre investment have been approved by councillors in Plymouth.