In his first prime-time State of the City address, Harris also said he would propose "modest increases" in property tax rates and would submit a 2004 city construction budget $100 million less than in the current fiscal year.

Property taxes were bound to increase this year because of a rise in the assessed value of homes and other property on O'ahu. A tax-rate increase would push taxes up further. However, Harris said the city's property tax revenues would still be less than in 1994.

"We are looking well beyond the fiscal year ahead," Harris said. "We want to develop reliable sources of revenue for the long-term, more efficiencies in operations and a framework that fairly distributes the cost of services to those who benefit ­ both resident and visitor."

Harris had to race through his nine-page speech in 25 minutes because of live-television constraints in KHON and KGMB broadcasting. Most of the 500 seats in the Honolulu Hale courtyard were filled, with Lt. Gov. "Duke" Aiona and University of Hawai'i President Evan Dobelle among the guests. Of the nine City Council members, the only absentee was Romy Cachola, who was out of town.

After eliminating the city's Housing Department five years ago, Harris said the city should divest itself of the 1,200 rental housing units owned and managed by the city. By selling them to nonprofit organizations and eligible owner-occupants, the city can unload $120 million in debt, Harris said.

Noting that the city privatizes more than $230 million of the city's annual budget, Harris said, "I believe we can save money by privatizing additional services." Among those singled out for privatization are the Waikiki Shell, the Blaisdell Arena and the Honolulu Zoo, as well as the maintenance of the Pali Golf Course and certain parks.

City Council Chairman Gary Okino said he liked many of the ideas the mayor had on balancing the budget. Okino (Pearl City, Waipi'o, Shafter), said Harris didn't talk about "quick fixes" that are popular with the voters, but proposed prudent ideas, such as raising property tax rates.

"He's done everything he's could to avoid raising taxes," Okino said. "He's taken all of our special reserves, we've borrowed enough money to defer taxation. But at some point you have to be reasonable and you have to increase our only source of recurring revenue. "

Okino also praised Harris for addressing other difficult issues, such as sewer and refuse improvements, and generating other sources of income through user fees.

Council Budget Chairwoman Ann Kobayashi, who has been a vocal critic of the administration's budget process, had only positive words after the speech. "I'm glad he talked about being cautious."

But freshman council member Charles Djou (Waikiki, Kaimuki, Waimanalo) said he did not agree that property tax rates needed to be increased. Djou said Harris should focus on reducing the size of the city government and on privatizing even more services.

Last year, Harris was making what he believed was his final State of the City speech because of his intention to run for governor. But those plans were set aside.

Djou feels Harris was more forthcoming in last night's speech.

"Last year he painted a rosy financial picture ... , but it's not as rosy this year," Djou said. "Politically it wouldn't have been smart for him to raise taxes while running for governor. But now he's in his last two years and he doesn't have a re-election battle. If he's going to raise taxes, I guess it's now. My problem is I just don't think it's the right time."

But Djou said he liked Harris' plan to increase pedestrian areas in Waikiki, increase recycling and renewable resources, and privatize city facilities. He also agreed with the mayor's plan to reduce the construction budget by $100 million and the call for the city to get out of the public housing business.

After the speech, Harris said he has discussed privatizing the Shell with promoters. "The idea would be to get that used more often. I think that's dark two-thirds of the time, there's no one using it."

Dobelle has advanced an idea to turn the Blaisdell Arena into a tourist attraction similar to the Exploratorium in San Francisco, Harris said.

After the speech, Harris said he would not know whether private companies would be interested in operating these properties, adding that when the city gave the private sector the opportunity to bid on managing the Waipi'o Soccer Complex, "no one came in with a proposal that was going to save us any money."

He also said he would work with the unions when privatizing city facilities. "We don't intend for city employees to lose their jobs. They would have to be shifted over to other vacancies ..."

Harris said the city would also try to maximize the return on city assets and facilities, by bulk-marketing tee times at the less popular municipal golf courses, expanding golf course concessions into restaurant operations and pursuing a partnership with Hawai'i Pacific University for night use of Hanauma Bay.

Harris said it is too early to say how much of a property tax rate increase he will propose, saying only that he will strive to keep revenues less than $433 million, as it was when he took office in 1994.

To stop the spread of urban sprawl and to encourage diversified agriculture, Harris urged the City Council to pass Bill 36, which would permanently keep 87,000 acres under agricultural zoning. The city will also upgrade its Wahiawa wastewater treatment plant so it can produce water suitable for irrigating crops, he said.

To east O'ahu's transportation problems, Harris said he would work with the governor and Legislature to forge a consensus on a regional transportation system that would address traffic from Central and Leeward O'ahu to downtown.

Harris also wants to convert the bus fleet to one that runs on non-polluting fuel cells, and to implement high-tech bus passes that the bus would automatically debit without the passenger having to take it out of their wallet or purse.

To increase recycling on O'ahu, Harris said, the city this year will reinstitute curbside recycling. Harris said the city also wants to triple the amount of waste it recycles into compost through a partnership with the Navy. Last year the program recycled 10 tons of biosolids per day; the city's goal is to increase that by another 20 tons by 2006.