Honolulu’s elected leaders are facing the hard facts of budgetary realities, and the picture is grim. The recession is certain to plunge the city into a severe budget crisis in the coming fiscal cycle, akin to the deficit-induced agony state policymakers are enduring now.

The knotty issue that the City Council must resolve today is: Should the city shield Oahu’s owner-occupants from the brunt of what will be an increased tax burden next year? And how can the city avoid subjecting other taxpayers to excessive pain?
The city administration has proposed the shield: a separate “homeowner” tax classification for people whose property is their primary residence. Critics had voiced concern that this would hit other taxpayers disproportionately.
Fortunately, both sides have taken a step toward a compromise that provides some assurance of fairness while extending tax relief broadly toward people who, in this difficult economy, need some help.
The council should pass Bill 51 today, creating this new category. The economic downturn has dealt such a harsh blow to many families that some respite from taxes is imperative.
Administration officials now favor adoption of a resolution to limit the fallout on taxpayers who don’t live in the property they own.
Specifically, the resolution would limit commercial property owners — who already pay a higher tax rate — to contributing 45 percent of the revenue the city collects. The new homeowner class would bear 25 percent, leaving 30 percent to the “nonhomeowner” taxpayers.
This policy seems a fair one, by assessing somewhat more from those who can afford to invest in property beyond their own personal residence but setting a reasonable ceiling.
Further, the council should consider advancing Bill 9, which would extend the “circuit breaker” tax relief that exists for lower-income homeowners to a wider swath of taxpayers.
When property assessments go out in the next month, owners are sure to see their property values drop as a result of the recession. Creating the new classification now provides some assurance to roughly 140,000 owner-occupants that their tax rate won’t have to rise sky-high to make up the loss of revenues.
The city can and should comb through its expenditures and reduce non-essential costs and services so that the hit on property owners can be kept within bounds. But the new classification would provide an extra tool for managing how the tax burden is distributed.
In critical times, such tools become an absolute necessity.