After winning re-election by a wide margin Tuesday, Mayor Mufi Hannemann now faces the difficult dual tasks of maintaining city services during tough economic times while overseeing the start of the largest public works project in state history.

Not only did the voters retain Hannemann, but they approved the city's $4.28 billion commuter rail-transit project, which the city hopes to break ground on in 2009.

Hannemann, like other municipal leaders across he country, must deal with a weakened economy that has already forced the city to conduct business as if the current $1.9 billion operating budget has been trimmed by $52 million.

With visitor arrivals falling off and consumer spending low, the short-term economic prognosis is not good.

"The Honolulu economy is now in recession, there is no doubt about it," said Leroy Laney, a professor of finance and economics at Hawai'i Pacific University and a former senior vice president and chief economist for First Hawaiian Bank. "We have to look long and hard to find any optimistic signs.

"We will continue to be in recession through the major part of 2009. Everything that happened prior to the financial crisis this fall could have led us to recession. We didn't need this greater uncertainty that came with the financial crisis. That's the thing that kicks us over the cliff."

Hannemann acknowledged the difficult economic times but said any possible budget cuts would come from the city's operating budget, not capital improvements.

He said he would focus on road, sewer and other infrastructure construction and repair as a way to keep workers employed and the economy moving. He cited his experience as director of the state Department of Business, Economic Development and Tourism.

"The economy plays right into my background. I've dealt with this type of stuff before and I just think that kind of experience will help me steer the city through this," Hannemann said. "Obviously nothing can stimulate this economy more than the rail transit project. Let's not repeat what happened with the H-3 (Freeway). We took so long with so many costly delays it drove up the total cost."

Neal Milner, a political scientist and ombudsman at the University of Hawai'i, said, "What he's facing is what every major politician, mayor, governor or president is facing right now. You've got pressing demands for the future that you want to get started (now) in an increasing fiscal crisis. The typical way out of it, without raising taxes, is to cut the stuff you can cut and that's not rail."

Hannemann goes back to work with a City Council where members Charles K. Djou, Donovan Dela Cruz and Romy M. Cachola supported mayoral challenger Ann Kobayashi and openly campaigned against him.

"In the end it showed that the truth prevailed. The large majority of the population refused to believe the false allegations and the negative campaigning," Hannemann said. "They accepted our record of accomplishment and said we want more of it. My door is always open. That's how I operate. I am always ready to work with anyone."

Dela Cruz likened the race to a competitive martial arts match. Both opponents fought hard, but showed respect before and after the race.

"There are going to be winners and losers in any race. We all have responsibilities to the people who elected us. Where we can compromise and agree we should," Dela Cruz said. "The people have to come first. I think now a lot of the elected officials need to come together and move forward."