WAILUKU, Maui - Maui County Council members agreed to reduce property tax rates for bed-and-breakfast operations Friday, but decided to increase the rate on unimproved residential properties to make up the lost revenue.

Responding to B&B owners who said the proposed rate of $5 per $1,000 of assessed property value was too high, council members knocked the rate down to $4. They looked at undeveloped residentially zoned lands to make up for the loss, and raised the rate for that category from $6 to $6.25.

The council's Budget and Finance Committee on Friday wrapped up nearly six weeks of deliberations on the county budget for the year. The committee is scheduled to return at 9 a.m. Monday to vote on a $524.2 million plan for 2011, a 7 percent cut in spending from the current fiscal year.

The full council has until the end of May to approve a budget, which will go into effect July 1.

The county established a new "commercialized residential" property tax category this year for home-based businesses, including bed-and-breakfasts and transient vacation rentals. The proposed $5 rate was already down from the rate of $6.25 initially requested by Mayor Charmaine Tavares.

But B&B owners, some of whom previously had been paying the lowest "homeowner" rate on their properties, said the proposed rate could double or triple their property tax bills and shut down their businesses or drive them underground.

Some B&B owners had suggested a rate of $3.12, but council members wouldn't go that far.

"Sorry for them - they want $3.12. I think, nah," said Council Member Mike Victorino.

He called the proposed $4 rate "a good compromise."

Council Member Gladys Baisa noted the vacation-rental industry already had shrunk, due to the down economy and the county's crackdown on illegal operations.

"If we tax them really heavily . . . here we go again, more people will be laid off," she said.

But Council Member Mike Molina had reservations, noting that people who own B&Bs and vacation rentals would now pay a lower property tax rate than landowners with long-term rentals on their properties. They would pay $5 under the proposed rates.

Cutting the rate for B&Bs would cost the county $73,191 in lost revenue. Council members raised an additional $82,770 to cover the loss by adding 25 cents to the rate for unimproved residential properties.

Also Friday, council members agreed to add two provisions to the budget that would place restrictions on the county Department of Environmental Management's injection well program.

One provision, introduced by Council Member Wayne Nishiki, would require the department to work with the Department of Water Supply and other agencies to study alternatives for recycling wastewater before spending money budgeted to rehabilitate the county's existing injection wells.

A second provision, introduced by Council Member Sol Kaho'ohalahala, would require the Department of Environmental Management to begin testing for water contamination from the Lahaina Wastewater Reclamation Facility.

Both provisions would require a status report by Jan. 1.

Department officials have told the council they already are communicating with the U.S. Environmental Protection Agency about how to comply with an order to conduct water sampling at the Lahaina treatment plant.

Nishiki and Kaho'ohalahala sought to set aside money for the studies, but council members said there was not enough funding still available in the budget.