Property tax rates for O'ahu houses and apartments were tentatively lowered yesterday and may dip further before a final City Council vote next month.

The council's budget committee dropped the rates for properties classified as improved residential or apartment by 30 cents — from $3.59 to $3.29 — per thousand dollars of assessed value.

That could lower this year's tax bills for many homeowners — if their property's value has not increased so much that it wipes out any savings from the lowered rates.

To help make up for the revenue the city would forgo by lowering those rates, more of the city's tax burden may soon be shifted from homeowners to businesses.

The council tentatively voted earlier to raise the rate for property classified as hotel and resort, commercial, or industrial, from $11.97 to $12.50 per $1,000 of assessed value.

Those rates were not changed yesterday, but some council members said they remained hopeful that spending cuts would allow them to back off on the increases before the final vote on June 6.

Murray Towill, president of the Hawai'i Hotel and Lodging Association, urged the council to reject tax rate increases for any property category, because assessed values are steadily rising.

The council is also moving to retain a tax discount of $200 for residents who qualify for a homeowner exemption, as was approved last year.

Mayor Mufi Hannemann had sought a $376 discount this year, and the creation of a new homeowner tax classification for future years, which could have a lower tax rate than residential properties that aren't owner-occupied.

But that proposal appears to have stalled, after several council members raised concerns that the new classification would discourage owners from renting housing that's sorely needed on O'ahu.

The council is also considering lowering the tax rate on vacant agricultural land, which has been tentatively set at $8.50 per $1,000 of value.

The council earlier lowered the rate for agricultural land that's currently used for farming, from $8.57 to $5.70.

Kapu Smith, land manager for Kamehameha Schools' Kawailoa Plantation, said having a higher rate for vacant agricultural land would discourage owners from keeping such land available for farming.

Final decisions on the tax rates will come after the council decides whether to make additional cuts to Hannemann's proposed $1.6 billion annual operating budget. The council tentatively cut about $5 million earlier, and is considering how much money to set aside for future health benefits for retired city workers.

Reach Johnny Brannon at jbrannon@honoluluadvertiser.com.