Homeowners will benefit from a reduction in Honolulu's residential tax rate as well as a one-time discount of $200 under tax rates and budget and spending plans given final approval yesterday by the City Council.

However, business owners will see their property taxes rise. And consumers can expect to end up paying higher prices as a result.

Even with the tax breaks for homeowners, the $1.48 billion operating budget is Honolulu's largest ever, and the $680 million construction budget ranks high in the record books, too.

Council Budget Chairwoman Ann Kobayashi said finding a "fair and balanced budget addressing the city's needs" was difficult. But she felt the balance was struck between easing the burden on taxpayers while still paying for such key city services as sewers, roads and public safety.

The one-time tax discount will go to homeowners on record with an owner-occupant exemption, Kobayashi said. City officials estimate the discount — a one-time reduction — will decrease property tax revenues by $27.6 million for the coming fiscal year, which begins July 1.

Even Councilman Charles Djou, who cast the lone vote against both budget bills, agreed to support the property tax rate bill. Djou said he would prefer to see no rate increase for nonresidential classes but saw the overall reduction as a benefit for taxpayers.

"It is a net tax decrease," he said.

'BETTER THAN NOTHING'

Hundreds of homeowners complained to the City Council and Mayor Mufi Hannemann after property tax assessments went out in December about another year of double-digit increases and their soaring taxes.

Kobayashi said the council eased the tax rates for residential properties — reducing it by 16 cents per $1,000 in valuation — based on a suggestion that first came from Hannemann. That takes the residential rate for single-family and apartment owners from $3.75 per $1,000 in valuation to $3.59 per $1,000 in valuation.

That means for a house valued at $600,000 (slightly less than the median price), the council's action would result in a savings of about $290 this year for a homeowner with an exemption. That's a $200 break from the one-time discount and a $90 savings from the lower tax rate.

That may not be enough to entirely offset the tax increase accompanying property values that rose an average of 26 percent on O'ahu last year. But relief — even if modest — was welcomed by homeowners who have seen assessed values nearly double in recent years, sending tax bills skyrocketing.

"Well, a little bit is better than nothing at all," said Ma'ili homeowner Pat Childs yesterday.

Childs, who moved to Hawai'i from Nebraska in 2001, said what amazes her is the speed of the increases.

"It always amazes me at how fast the value of my property goes up for tax purposes," she said. "That would take years and years in Nebraska."

NOT ENOUGH FOR SOME

Others said the city should have done more.

"I think they haven't addressed the basic problem of the guy who's retired — or maybe he's not retired — who's owned his home for a long time in an area that has received major appreciation," said Schuyler "Lucky" Cole, a North Shore real estate salesman.

The savings will show up on tax bills that go out to homeowners and lenders in July and August.

The nonresidential rate will go from $11.37 per $1,000 valuation to $11.97 per $1,000 valuation.

COMPROMISE REACHED

Hannemann called the final property tax rate/budget plan a "meaningful compromise."

Kobayashi said the council agreed to increase the nonresidential property tax rates — business, commercial and hotel/resort category tax rates to offset the lower residential rate.

The rate for residential properties amounts to a $19.5 million decrease in tax revenues while the increase in the non-residential rate will bring in $13.3 million. Hannemann said he would have preferred no rate increase but deferred to the council members.

"It's their call," he said.

The changes in tax rates still add up to just a fraction of the overall budget, the majority of which will go toward sewer improvements, roads and other vital infrastructure.

Overall, Hannemann praised the City Council for passing a "no-frills" budget that he said gives him 95 percent of what his administration asked for in February.

"We are focusing on core city services," he said.

Kailua resident Bob Grantham helped form a group of taxpayers pushing for a break this year. Grantham said more than 10,000 people signed a grassroots petition for Property Tax Relief Now.

ADDING TO THE BURDEN?

Yesterday, Grantham told the council that they found the "most equitable" compromise available in easing the burden on homeowners while bumping it up for nonresidential properties.

But Jim Tollefson, president of the Chamber of Commerce of Hawai'i, said business owners will pass on their tax increase to consumers.

Adding to the property taxes for businesses "will result in increased cost of doing business in Hawai'i," he said. Although it's not the only factor pushing up that cost, Tollefson said the property tax rate hike adds to the burden for businesses.

Unlike last year when the budget included a number of fee increases, this budget included only one: a $2-per-ticket increase in the price of admission for tourists visiting Honolulu Zoo.

Other budget spending highlights include: