The Manassas City Council rejected a proposal Monday to institute a new tax on cellular telephones.

The fee of roughly $3 a month per phone would have helped the city close a budget gap caused by declining real estate and property tax revenue from some of its largest commercial taxpayers.

But council members said they opposed a new tax at a time when homeowners will likely be socked with rising tax bills because of higher real estate assessments. Others said it was unwise to opt for a new tax before city spending can be scrutinized.

"I'm not ready to vote for a tax we've never had before when residents have seen increased taxes,'' said Vice Mayor Harry J. "Hal" Parrish II (R).

"With increased assessments and possible increases in utility bills, we felt we felt we could not support it,'' said council member Robert Oliver (R), chairman of the council's finance committee, which didn't support the tax plan.

In addition to Oliver and Parrish, Republican council members Judith S. Hays, Eugene R. Rainville and Ulysses X. White voted against the tax.

Council member J. Steven Randolph (I) supported the plan, saying that any tax reductions should be focused on the property tax.

"You have an option to whether or not you have a cell phone, but if you own a house and taxes go up, there is no other alternative,'' Randolph said.

City Manager Lawrence D. Hughes put forward the new tax in his proposed $74.5 million spending plan unveiled last month. In addition to the cell phone tax, Hughes is proposing raising the lodging tax from 4 percent to 5 percent and increasing the cigarette tax 10 cents, to 25 cents a pack. The three taxes combined could raise an estimated $518,000 annually, he said.

Hughes said the city lost $3.1 million in revenue after Micron Technology Inc. purchased the Dominion Semiconductor plant in April. When Toshiba Corp. sold the Dominion plant to Micron, it removed a lot of expensive equipment, and Manassas lost about $2 million in machinery and tool taxes. Approximately $1 million more was lost because the plant's real estate value dropped.

The budget for fiscal 2004, which begins July 1, calls for a general 4 percent rise in spending, including a salary increase for city workers.

With the new taxes, Hughes would be able to maintain the current real estate tax rate at $ 1.20 per $100 of assessed value. Meanwhile, the assessment on the typical Manassas house rose about 16 percent, he said.

Although the City Council doesn't have to approve a final spending plan until next month, a tax on cellular telephones requires a 120-day notice to telecommunication companies. That is why the proposal was taken to the council first and unattached. Hughes said many of the city's neighbors have the cell phone tax. And the one that doesn't, Fairfax County, is preparing to institute one this year, he said.

Hughes also proposed using $ 1.5 million of the city's savings to help make up for the revenue shortfall.