Despite last-minute pleas to cut city spending and assist small businesses, the Honolulu City Council yesterday raised commercial property taxes and approved a package of steep sewer fee hikes that will kick in over four years.

But the council also reduced tax rates for homes, apartments and farms, as expected, while approving a $1.6 billion operating budget — the city's largest ever. The $789 million construction budget also set a new record.

Debbie Frasco, who owns a small Kapahulu lot with a dentist's office and a cottage, said small businesses and property owners are already hurting from rising tax bills and will suffer further.

"The city needs to help small businesses," she said. "We are not 'big box' companies with a lot of cash to fall back on."

Tax rates for properties classified as hotel or resort, industrial or commercial will rise from $11.97 to $12.40 per $1,000 of assessed value.

Kimo Greene, a small North Shore citrus farmer, applauded the tax break for agricultural land — the rate will drop from $8.57 to $5.70 — but worried about the future.

"It should be a substantial savings, but what's going to happen when we retire?" he said. "I don't want to have to move when I'm 70 because I can't afford the taxes."

Like most other O'ahu property owners, Greene has seen his land's assessed value skyrocket in recent years, along with his tax bills.

Tax rates for homes and apartments will drop from $3.59 to $3.29, but critics said that's not enough in light of tax bills that have been steadily rising.

"We are hurting now," said Kane'ohe retiree Ted Kanemori, who called the reduction "half-hearted."

He complained that city spending had grown too fast, and would lead to trouble if the economy slows down.

"When you're fat with cash, you approve too many projects," he told the council.

But some council members said the city is struggling to make up for years of deferred maintenance and neglect, and to provide services that residents demand.

"We've saved money by not doing projects in the past, and what happened? The massive sewage spill in Waikiki," said Councilman Gary Okino, referring to the sewer pipe rupture that sent nearly 50 million gallons of raw sewage into the Ala Wai Canal last year.

Sewer fees — which were already scheduled to rise before yesterday's increases — will go up 25 percent next month, then 18 percent in each of the next three years. That's expected to roughly double the average home's monthly sewer charge by 2011, from $45.44 to more than $90.

The $789 million construction budget approved yesterday includes about $350 million for sewer repair and upgrade projects across the island.

Mayor Mufi Hannemann said he was generally pleased with the budget and the tax rates, but could not guarantee he won't propose even higher sewer fees next year.

That could depend on whether or not the city is able to reach a comprehensive settlement with the U.S. Environmental Protection Agency over its sewer problems, Hannemann said.

"We can't rule it out, but I'm making it real clear to the EPA that there's only so much we can pay, and I'm not interested in bankrupting the city," he said. "Enough is enough. There's only so much we can do."

Two federal court agreements require the city to complete numerous projects related to the sewage collection system. The EPA has also indicated it will require additional upgrades at two massive sewage treatment plants, but has not made final rulings.

Councilman Charles Djou — who voted against the sewer fees, tax rates, and the budget — said he believed city spending was out of control.

"This is too much," he said. "People can't afford it, and we can't sustain it. We need a spending cap on the drunken sailor spending at City Hall."

But Hannemann blasted Djou for calling earlier for sewage system repairs and a residential recycling program, then voting against the budget and revenue streams that support it.

"Charles Djou can't continue to have it both ways," Hannemann said. "He is the biggest hypocrite at the City Council, arguing out of both sides of his mouth. This is vintage Charles Djou political grandstanding."

Djou had proposed an amended budget that would have kept commercial property taxes unchanged and slashed a city worker retirement benefits fund. Council members Donovan Dela Cruz, Ann Kobayashi and Romy Cachola joined him but fell one vote short.

Cachola then voted with the majority — Todd Apo, Nestor Garcia, Barbara Marshall, Okino and Rod Tam — to approve the tax rates and budget. Dela Cruz, Djou and Kobayashi voted in opposition. Djou was the sole vote against the sewer fees.

Reach Johnny Brannon at jbrannon@honoluluadvertiser.com.