The City Council moved another step toward a budget that raises the property tax on non-occupant homeowners, but promised to look for ways to minimize the increase before a final vote.

The council voted 9-0 for the $1.82 billion operating budget in the second of three needed approvals.

The council kept in the budget a proposal to boost property taxes on non-occupant homeowners to $3.72 per $1,000 of home value, up from $3.42. The tax increase, which was part of Mayor Mufi Hannemann's budget proposal, adds about $18 million to city coffers.

As they moved the budget along, council members promised to look further into the possibility of lessening, if not eliminating, the tax hike.

The non-occupant homeowners class is the only class to get a rate increase in the budget bill.

"I'm absolutely committed to lowering the tax rate for our (non-occupant home-owner) class and I hope that my colleagues would join me," said Councilman Ikaika Anderson, who's led a faction of members opposed to the increase. "This is definitely not over yet."

"This is still a work in progress," said Council Budget Chairman Nestor Garcia.

Bill 15(10) will go back to the Council Budget Committee on May 24, and then to the full council for a final vote on June 9. The new budget year begins July 1.

Properties in the owner-occupant category will still be assessed $3.42 per $1,000, as they are this year.

Anderson attempted to push through a budget bill that would have cut funding for city positions that have been left vacant. That would free up money and allow the city to avoid or lessen the property tax increase.

Anderson sought to take the money from positions that have been vacant since before July 1, 2009, a pot of about $18 million.

Council members rejected Anderson's version. Members Romy Cachola, Charles Djou and Ann Kobayashi joined Anderson in voting for the measure while members Todd Apo, Donovan Dela Cruz, Nestor Garcia, Gary Okino and Rod Tam were opposed.

The budget bill that won council approval was a draft introduced by Dela Cruz, which includes the mayor's plan for increasing taxes.

That bill also calls for taking some money from vacant, funded positions (although less than proposed by Anderson), reducing the amount set aside for legal judgments and settlements, grabbing $3.8 million from an energy contingency account and transferring $9.2 million of that to the Fiscal Stability Fund, the city's version of a rainy-day fund.

HOTEL TAX SHARE SAFE

Garcia said with the Legislature's decision to allow Honolulu and other three counties to keep their existing share of hotel room taxes, the threat to parks' recreation programs, the Royal Hawaiian Band and other city services appears to have eased.

He said he agrees with Anderson's criticism that there are too many vacant, unfunded positions in the city government. "But at the same time though ... the administration needs flexibility," he said, noting that one example is the sudden need to hire more police officers for the Asia-Pacific Economic Cooperation's conference in Honolulu next year.

While the draft that moved out of the council yesterday increases the tax burden on non-occupant homeowners, Garcia said, he expects a lot of discussion in his budget committee will be aimed at lowering their tax rate.

Garcia said he is not comfortable with the creation of the new class of owners, much less the rate.

The council voted 5-4 last year to create the new class for owner-occupants, leaving properties with absent owners in the standard residential category.

Hannemann and some members of the council believe owner-occupants should be sheltered from higher taxes at the expense of other property owners, specifically speculators, investors or others who don't live on residential properties they own.

But Anderson and other council members believe that philosophy places too high a burden on those who own properties where they don't live, and that the burden would then get shifted to renters who generally can't afford to purchase their own homes.

Bill Brennan, spokesman for Hannemann, said the mayor is pleased with the way the budget is progressing.

"He's working closely with the council chair, the budget chair, other council members collaboratively trying to reach some sort of compromise that would address both the council's concern to trim the budget a little bit more, as well as the administration's concerns to focus on providing core city services," Brennan said.

Djou, who has made a campaign slogan out of his record of voting against all tax increases, said he voted to approve the budget on second reading only to move the process along.