Just days after the state Legislature approved tax increases to help meet its budget deficit, the City Council is looking at a potential hike in property taxes.

The Council Budget Committee will consider a property tax increase at its meeting at Honolulu Hale at 9 a.m. tomorrow.

Mayor Mufi Hannemann proposed a budget that calls for an increase in the residential property tax rate to $3.59 per $1,000 of assessed value, up from $3.29 this year. Factoring in a one-time $75-a-household real property tax credit, the increase would amount to about a $120 annual hike for the typical family owning a single-family home on O'ahu.

The mayor and council members are facing a decline in income due in part to a drop in property values, hotel room tax and fuel tax collections and a decline in revenue from investments.

Council members said they are combing through the $1.8 billion operating budget for ways to cut spending and reduce or even eliminate the need for a hike in residential property tax rates.

Council Budget Chairman Nestor Garcia said that while his committee and staff are searching for ways to soften the rate hike, it's not likely that an increase can be avoided entirely.

"I'm not sure if that's realistic," Garcia said. He noted that next year's operating budget is only 0.28 percent more than the budget approved by the council for this year.

"There wasn't much fat there; I'm getting into the muscle and I might be starting to get into the bone, so that's why we've got to be careful now," he said.

POSSIBLE TRIMS

Garcia said among the cuts he's looking at are eliminating TheBoat operations, saving about $5 million and delaying the start of curbside recycling in suburban O'ahu neighborhoods at a savings of about $4 million to $5 million. There also won't be any increases in the salaries of elected officials or other nonunionized employees except for those whose pay is contractually directly to coincide with raises for unionized workers.

He also is thinking about increasing the city's fuel tax of 16.5 cents per gallon by a few pennies. The city last raised the fuel tax in 1989 — by 5 cents. Garcia said he's looking at raising the fuel tax less than that.

Noting that hoteliers will be seeing an increase in hotel room taxes, Garcia said he wants to reduce the property tax rate for the hotel/resort class.

One thing he won't consider is any cuts in the budget for a planned $5.4 billion elevated commuter rail line, which is to begin construction at the end of this year, he said.

Garcia has not suggested any changes to the administration's plan to increase a number of other charges, including motor vehicle weight taxes, highway beautification fees, bus fares, golf green and cart fees, Honolulu Zoo and Hanauma Bay Nature Preserve entrance fees, park attendant fees and alarm permit fees.

Council members Duke Bainum, Donovan Dela Cruz and Charles Djou are proposing to cut the budget by roughly $40 million to avoid the need for a property tax increase.

Among the cuts Bainum is suggesting are about $5.6 million in rail-related expenses and $4 million from the judgment and losses account, used when the city loses a lawsuit. Dela Cruz wants to eliminate salary increases for noncollective bargaining positions and any funding for positions vacant since 1995.

Djou wants to trim 5 percent from the city budget across all agencies and programs, excluding federal funds, special funds or debt service.

BUDGET CHANGES

City Budget Director Rix Maurer III said the administration will consider whatever changes the council decides to make with the budget and property tax rates, although he declined to discuss any specific suggestions made by council members.

"I think we had a prudent and fiscally responsible budget that we've submitted to the council and we certainly think it holds the line on year-over-year spending while providing the services that the residents want," Maurer said.

The administration has also pointed out that the operating budget is essentially the same for next year despite increases in fixed costs such as pay for police and firefighters, debt service payments and employer health contributions.

The council has until June 15 to pass its annual budget and tax rate plan, but is expected to do so at its June 10 meeting.

The budget year runs from July 1 to June 30.