Editor's note: Last week's Hot Seat session with Mayor Mufi Hannemann was conducted via live streaming video. The following are edited excerpts from that July 1 session.

VIDEO: View the July 1 video Hot Seat with Honolulu Mayor Mufi Hannemann

Mayor Mufi Hannemann: A year ago about this time, we knew that the deficit was going to be $128 million, so what we did then is we instituted a number of steps to start to whittle down at that deficit. We froze hiring, we restricted travel, we cut some $36.3 million from the budget that were salaries for vacant positions. All of that led to us being able to whittle the deficit down to $50 million.

So Eric, we did a lot of that cutting prior to that budget going to the council at $50 million.

Even with that, people always want the same amount of services, or they want more services, so we had to look at a number of fees and see whether we could utilize the user fee concept, that if you use that particular service does it now warrant an increase.

In terms of real property taxes, that's an issue that we pondered very seriously. We asked for a 30-cent raise from $3.29 to $3.59. When we came into office in 2005, the rate was $3.79. But since the challenges that we face from here on out are very daunting, especially with next year, we asked the council to go up to $3.59 with a $75 tax credit.

Tax credits are very important. They help people with median to low income basically have a lower tax bill. The reason why I let it become law without my signature is that the council didn't agree to put the tax credit on. ...

I'm asking the council to again consider a homeowner classification, where we can separate the investors and the speculators, have them pay a higher tax rate and leave a very stable rate for our homeowner occupants. Kaua'i has done that since the '90s, Maui has done that since the '90s and the Big Island has done that since the '90s.

HapHaw: When can we expect an announcement about (your) plans to run for governor?

Hannemann: I have said since 2008 that I want to explore the possibility of running for higher office. I made that very clear. People knew that when they voted for me. I am very much focused at the job at hand at being governor, sorry, being mayor. But the governor's position is something that requires a lot of volunteer work, fundraising and so forth.

So we set up an exploratory committee — 105 of the leading public and private sector individuals in our community. They're going to do all of the things that are necessary to prepare me for a launch into that race if and when I decide to do that.

Jeanne Mariani-Belding: Does that mean you've ruled out a run for Congress or is that still up in the air for you?

Hannemann: I would say right now if we are going to run in 2010, it looks like it is going to be the governor's position. Although I still have people every day saying: "You know, mayor, we would like for you to go to Washington, D.C." We're saying at this point it's Honolulu Hale. (In) 2010, if we run, it's Washington Place.

Christian: Given this tight economy, will the rail-transit project break ground on time? How soon will we have the entire line completed, and how long will the tax be in effect?

Hannemann: The tax will be in place until 2022. The segment that we are building from 2009 will be completed in 2018. We don't see any reason why we shouldn't be able to have a timely groundbreaking. We're trying to break ground late 2009, that's the goal. We're getting great reviews on our project. I recently went to Washington and met with Peter Rogoff again, who is the head of the Federal Transit Administration. He continues to give us a thumbs-up for moving it along.

Richard Gozinya: Will the city continue construction of the new rail system if the federal government does not contribute the more than $1 billion originally expected?

Hannemann: There is a process called the ROD (record of decision). I need to have that record of decision from the federal government before I go forward. I don't need the full funding grant agreement or all of the federal dollars to go forward. A ROD is good enough for me, gives me a good level of confidence that what's to follow will be a full funding grant agreement, and the fact that we are already getting money leading up to the ROD. We checked that out with the FTA, I checked it with other cities. That's a good barometer of federal money or the greater share of federal money coming forward.

Paul I.: I have a question in regards to the recent controversy over Hawaiian Waste Systems and the city's decision to withdraw the trash-shipping contract. Before the city deemed HWS as nonresponsive and decided to rescind the contract, was there any effort by the city to address HWS' "assumptions" with their management, like the city's desire to use its own scale?

Hannemann: Yes, there has been a lot of communication and dialogue with Hawaiian Waste. They had to go through two departments to have their bid assessed. First was the Department of Environmental Services, then with the Department of Budget and Fiscal Services because the director is the chief procurement officer.

But (Hawaiian Waste CEO Jim Hodge) made a lot of assumptions along the way he shouldn't have made. Because what he basically did was pour $10 million into this plant, purchasing the scale. And you don't do that if you don't have a written contract. So because he had invested all this money, it really looks like we led him down the path and then we pulled the plug. We didn't do that.

I want to remind people of this, shipping is not green ... it's an interim solution until we get the third boiler in place and this is why full control is very important. Full control means that the city controls the amount of 'opala that goes out. I think Mr. Hodge would love to have all that 'opala come to him and he could ship it so he can sustain his operation, which is why it was a bad decision on his part to purchase the scale.

Now he's saying that he always meant to give it to the city. That's not true.

We're trying to get to a good place with him. If we can't, we're going to keep moving it forward so we can ship some of the 'opala out. Keep the bulk back because when we put the third boiler at H-Power, that's 300,000 tons more of 'opala that we can convert to energy.