The Lawrence City Commission on Tuesday approved a $122 million city budget for 2005 but deferred action on raising water and sewer rates.

Commissioners said they wanted to further mull a revamping of the rate system. The proposal on the table would begin changing how rates are calculated, so that by 2007 the city’s biggest water customers would be charged higher rates.

The new system is designed to encourage water conservation.

“I think it reflects the values this community has in using its resources wisely,” Commissioner David Dunfield said of the proposal.

Commissioner Boog Highberger said the city might be able to promote conservation by adopting a flat fee — the same rates for both big and small users. The current water rate system reduces rates the more a customer uses.

“I don’t want to do anything draconian,” Highberger said of penalizing bigger water customers.

And Commissioner David Schauner suggested creating incentives for water conservation, instead of penalizing the most prolific users.

“We ought to be helping on the other side of the equation, as well,” Schauner said.

Even as they gave final approval to the budget, commissioners were asked to approve money for a new program: round-the-clock services for the homeless.

Steve Ozark, chairman of the Lawrence Coalition for Homeless Concerns, asked commissioners for $11,000 to create the program, which would offer services to the homeless during those afternoon hours when the Salvation Army, Lawrence Open Shelter and the Community Drop-In Center aren’t in session.

“When none of our service providers are open, that leaves it to our police and hospitals,” Ozark said.

Commissioners were hesitant, noting that the city has a task force working to create a solution to the issue of homelessness.

“I hate to undermine the bigger picture of the Homeless Task Force, when there’s been a year of work on that,” Commissioner Sue Hack said.

Commissioners will fully consider the request in two weeks.

As for the 2005 budget, the city’s tax rate will drop from 28.065 to 27.882 mills — a mill is $1 in tax for every $1,000 of assessed valuation — a 0.183-mill decrease. But valuation is rising by 6.4 percent, officials say. That means a $150,000 home now will be valued at nearly $160,000 for tax purposes. Factoring in the rate decrease and valuation increase, that homeowner would see the tax bill increase to $513 from $484.