The main point of contention yesterday was clearly the property tax rates.

Hannemann, upset that the council approved a residential tax rate hike that does not include a tax credit to help soften the blow for owner-occupants, did not rule out a veto.

He said he will take until June 25, the most time allowed by law, to consider whether to support the budget package.

Currently, homeowners are paying $3.29 per $1,000 with a $100 tax credit. Budget chairman Nestor Garcia proposed a plan that would have raised the residential property rate to $3.59 per $1,000 valuation with a $150 tax credit, a plan supported by Hannemann.

But that failed to muster five votes. Instead, Councilman Ikaika Anderson's proposal for a $3.42 rate with no tax credit was approved on a 7-1 vote.

"We should never ask our citizens to shell out more than is necessary of their hard-earned money," Anderson said.

Hannemann, at a press conference after the vote, disputed Anderson's suggestion that his plan would be more beneficial for owner-occupants.

A tax credit, Hannemann said, was needed to provide some relief to homeowners.

"This year, when we needed it most, they did not include it in their final package," the mayor said. "This means that most homeowners will pay more than they would have under the tax structure that we had proposed."

Hannemann and Budget Director Rix Maurer showed charts explaining how the Anderson plan would be more expensive for those owning homes valued at $200,000 and $600,000 and less expensive for those with $1 million or $2 million houses.

Anderson, earlier in the day, said there is no correlation between income and home values. Many constituents in his district live in homes valued at more than $1 million but are retired and have limited incomes, he said.

Council members had initially proposed hiking the fees for alarm permits issued to homeowners who have security alarms. But after testimony from the head of a major security alarm company, the council voted to kill that increase.

The council yesterday also approved a $1.7 billion capital budget for the next year that includes $917 million to start construction of the planned elevated commuter rail line from East Kapolei to Ala Moana.

The city still needs added council approval before it can issue nearly $1 billion in rail-related bonds to help finance train construction.

The city intends to start construction on the $5.4 billion, 20-mile rail in December, pending federal approval. The project is expected to be paid for via a general excise tax surcharge and a federal grant.