For him that means popular initiatives such as the Sunset on the Beach movie events will need more support from private business to survive. He'd like to see a scaled-back restoration project at the historic Waikiki Natatorium and is trimming construction projects that include landscaping, new signs and other amenities.

Hannemann said public safety, pothole repair and sewer repair and maintenance will be among the funding priorities in tight times.

Pressures on the city's current $1.5 billion annual budget include pay raises of almost $7 million for nearly 3,000 white-collar city workers and annual debt payments of $290 million.

Efforts to increase revenue this year include a bump in the tax rate for commercial, industrial and hotel properties. The rate for homes and apartments didn't go up, but most property owners will pay an average of 26 percent more in taxes because assessed values continue to climb.

Hannemann asked a panel of volunteers from businesses, the community, labor groups and the city to help assess the city's condition, and released its findings yesterday at Honolulu Hale. After seeing the report, he declared Honolulu's financial health "adequate," adding that an improving economy is helping the city toward a favorable bond rating. Favorable ratings allow governments to borrow at lower rates.

Hannemann said he has canceled $19.3 million in construction projects already. That includes 18 projects that would have cost $12.4 million and another 66 design consultant contracts that would have cost $6.9 million. He declined to provide a complete list yesterday. He did say he canceled a planned road through Central O'ahu Regional Park that would have connected Ka Uka Boulevard and Paiwa Street. Hannemann said it would have been a safety concern for people using the park.

John Zabriskie, a certified public accountant who retired from KPMG last year, is working for Hannemann as an unpaid senior policy adviser. "The city's fiscal health has been declining rapidly and will get worse unless significant changes occur," he said.

Zabriskie said the debt service is now the biggest item in the budget. "It now exceeds public safety spending," Zabriskie said.

Despite that financial picture, Hannemann said he hopes to be able to provide raises to government workers.

City Council member Charles Djou praised Hannemann for looking closely at the city's finances before releasing his spending plan, which is due by March 2.

Djou said the city should limit spending and debt in the future. "We've got to realize that our city government is too big."

He acknowledged that residents should expect a sewer fee increase of at least 10 percent, but likely less than the 23 percent mentioned last year.

The last time the city increased sewer fees was in 1993, when it raised the rates by more than 40 percent and fielded more than 5,000 complaints within the first year of the rate hike.

The city estimates that a typical family of four using 13,000 gallons of water a month pays $49.72 in water charges in a two-month billing period and an additional $68.60 in sewer-service charges, for a total bill of $118.32.

City Council budget chairwoman Ann Kobayashi said the city has been postponing some maintenance and debt repayment in previous years and must now deal with those realities.

She said city employees have been working hard, dealing with smaller staffs and merit a raise. "But we can't afford to give them what they deserve. We'll do what we can."

Kobayashi said the city can look at some other solutions — including selling some city property, such as the Ted Makalena Golf Course. She said the municipal course is difficult to maintain and not that popular.