Mayor Mufi Hannemann last night promised to deliver to the City Council a balanced operating budget, but offered few details about how he intends to address an estimated $140 million shortfall.

During his sixth, and possibly last, State of the City address, Hannemann listed a slew of accomplishments and spoke of several new initiatives.

Major themes of the speech included collaboration and optimism in the midst of a tough economic period, and doing what's right even if it's controversial.

"A leader has to have the courage of his convictions and the commitment to champion causes that may not always be popular, but which are ultimately the right things to do," Hannemann said in closing his speech before breaking into a personalized rendition of the song, "I Am Hawaii."

Hannemann spoke of fiscal accountability, and reiterated that the city will be instituting two-day-a-month furloughs for city employees. The shutdown of the Frank F. Fasi Municipal Building and Kapolei Hale on those days will reduce the city's payroll costs by about 4.5 percent, he said. Excluded managerial employees will join Hannemann's Cabinet this coming year in taking 5 percent pay cuts, the mayor said.

Hannemann said he will offer other details about how he will meet the budget challenge when he unveils his plan to the council on Monday.

He chastised Gov. Linda Lingle and state legislators for proposing to take away the city's share of hotel room tax revenues, which would cost the city about $45 million, and the one-half percent excise tax that the electorate agreed to allow the city to use for its upcoming $5.5 billion transit project.

"A few of our co-leaders in (state) government ... seem to believe that because we have a balanced budget without yet implementing furloughs, that we're flush with cash," Hannemann said.

What state officials neglect to mention is that he and the council took "the necessary, I daresay courageous, step" of raising property taxes and fees to meet the city's budget obligations, the mayor said.

Hannemann reiterated that the mass-transit project will not only provide travel alternatives, but provide an economic boost. "Once we get the go-ahead to begin construction, we'll be pumping $330 million into our local economy," he said.

BIG SAVINGS FOR CITY

The mayor said proposals for construction of the second phase of the project have just come in and will result in "substantial savings" from what had been projected. The city will save tens of millions of dollars because "contractors will bid low during an economic downturn," Hannemann said.

A symposium will be held in April on the issue of transit-oriented development along the major hubs for the rail line, the mayor said. Experts will discuss "how we can create sustainable communities with rail as the catalyst."

The city will embark on 100 capital improvement projects totaling $220 million over the next six months, he said. Those projects will range from work on roads and sewers to firehouse repairs and park improvements, he said.

The state and federal governments joined the city and the private sector in developing a transitional and long-term affordable rental housing project that broke ground in December, Hannemann said. Now the city wants to push forward with a similar project in Downtown Honolulu, although that project has met with some resistance from the community.

Among other partnerships Hannemann outlined:

• Taking over from Kapolei Property Development responsibility for building the last section of Kapolei Parkway in exchange for the landowner giving the city valuable parcels along the parkway.

• Working with Kamehameha Schools to allow for a Board of Water Supply base yard in East Honolulu. That plan would free up space at the water board's Beretania Street site for "higher and better use for that prime piece of Downtown real estate."

• Talking to Kaua'i County about the possibility of accepting its solid waste at the city's H-Power waste-to-energy facility .

• Allowing the state and the other counties to implement a new human resources and payroll system developed by the city.

City Council members who attended the address said they were pleased by it and willing to wait until Monday to hear more details about the budget.

"There were some good, long-range answers about what we can do from an investment side in our city," said council Chairman Todd Apo. "I would've liked to have heard a little bit more about property tax issues for this upcoming budget but he said he'll talk about that Monday."

While Hannemann did not say much about property taxes last night, Managing Director Kirk Caldwell last week told a legislative committee that the administration is considering not increasing taxes on owner-occupied dwellings, but only on those that are investment or second-home properties.

Councilman Ikaika Anderson said the speech was optimistic, and applauded the mayor's plan to provide more wastewater plant upgrades in his Windward council district.

'PLENTY OF WORK'

Hannemann supporters have formed a campaign committee that has raised $2 million in preparation for a potential run for governor.

If he does run, Hannemann must resign by the July 25 candidate filing deadline, but he made no mention of it during his speech.

Afterward, Hannemann was asked by reporters if he would be around to see through completion the initiatives he outlined .

"I've always said ... leave this place better than you found it. Everything I said tonight, I intend to at least get it started irrespective of what my final decision will be," he said.

Asked if he had a deadline for making a decision, Hannemann said, "The only thing I know is that the third week of July is the filing deadline, and I've still got plenty of work to do."