Most O'ahu homeowners would pay less in property taxes but far more in sewer fees under a $1.6 billion city spending plan unveiled yesterday by Mayor Mufi Hannemann.

Annual property taxes on an average single-family home would go down by $18 next year, according to the mayor's package. But average sewer fees would rise nearly $7 per month — or nearly $84 per year — beginning in July.

That's in addition to an average monthly increase of more than $4 that's already scheduled to kick in in the same month.

By 2009, the average monthly charge would be more than $67 under Hannemann's proposal, up from $45.44 this year.

Hannemann called his proposed budget a "no frills" plan that focuses on core city services and infrastructure, especially the aging sewer system.

In addition to operating costs, the plan earmarks $724 million for construction projects. That includes $351 million for sewer work and $43 million for road repair and pothole patching.

"We are paying the price for decades of neglect," Hannemann said, invoking last year's massive Ala Wai Canal sewage spill as evidence of the problems.

His plan faces months of contentious hearings before the City Council, which could alter it significantly.

"I'm delighted to see the amount of money planned for sewer improvements," said Council Chairwoman Barbara Marshall. "Obviously, there's a critical, critical need for it."

She was less enthusiastic about the proposed sewer fee hikes, noting that such fees were already scheduled to rise 10 percent in July.

Hannemann's plan would raise fees 15 percent more, for a total increase of 25 percent.

The next year, fees would increase again, by 8 percent, on top of a scheduled 10 percent increase already in the law.

"I'm obviously not happy about that," Marshall said. "I'm going to want to see some real hard figures about why that is necessary."

Hannemann said new sewer issues are continually being discovered.

"As we dig deeper into this problem, we see more things we want to do or are being asked to do by the (Environmental Protection Agency)," he said.

He noted that sewer fees had not increased in the 11 years before he took office in 2005.

"Yet our sewer repair and maintenance needs continued to grow," he said.

PROPERTY RATE STAYS

Property tax bills would not necessarily decrease for all homes under Hannemann's plan.

The $3.59 residential tax rate — which is applied to the assessed value of a property to determine its tax liability — would not change.

But homeowners on record with an owner-occupant exemption would receive a $376 discount. That's similar to a one-time $200 discount the council approved last year.

And because the council doubled the basic homeowner exemption — from $40,000 to $80,000 — a $600,000 home that increases in value next year to $684,000 would still get a tax bill that's $18 lower, Hannemann said.

He said he would continue to push for creation of a new "homeowner" property classification that would have its own, lower tax rate.

The homeowner classification would provide tax relief to owner-occupants, but not to out-of-state investors or those who can afford second homes, Hannemann said.

Hannemann said the council should have approved the plan when he first proposed it last year.

The $376 discount is meant to provide tax relief equivalent to a $3.25 tax rate that would have been proposed for the new homeowner classification, he said.

"This $376 discount will return $53 million to the taxpayers," Hannemann said.

Marshall said such a plan is flawed because it would do nothing to help renters or encourage the construction of new rental housing.

Hannemann's plan calls for a one-time, $150 payment to low-income renters. But Marshall said that's not enough in light of the island's skyrocketing rents.

"We have to have rentals, and not just rentals considered 'affordable' under (federal) guidelines," she said. "We need rentals that police, firefighters, teachers and others can afford to live in."

AGRICULTURE BREAK

Hannemann's plan also would significantly lower property tax rates for land classified as agricultural or preservation.

"I'm a big supporter of agriculture," he said. "I think it's a fallacy to assume that the future of agriculture rests solely on the Neighbor Islands. Helping agriculture helps our economy and ensures there is open space. The side benefit is that it helps tourism."

The rate for agricultural land would be lowered from $8.57 per $1,000 of assessed value to $5.70. The preservation land rate would decrease from $9.57 to $5.70.

But the rate would increase slightly for hotel/resort, commercial and industrial land, from $11.97 to $12.50.