‘It is not a pretty truth’

Shedding a number of "nonproductive" pieces of real estate and getting the city out of the business of managing affordable-housing properties would free up money and resources that could be put toward more important services, Mayor Peter Carlisle said.

The city will need to look for more of both — money and government resources — as it looks to rebound from a bleak financial situation, Carlisle said yesterday in delivering his first State of the City speech.

"You first need to be told the truth about where the city is right now," he told an audience at Mission Memorial Auditorium. "It is not a pretty truth."

The address, Carlisle’s first, comes as his administration prepares to present its 2012 fiscal year budget to the City Council on Wednesday.

Carlisle offered few specifics but laid out a plan that called for some increases in fees and investment in public works projects such as the $5.5 billion rail transit project and the required upgrades of the city’s sewage and waste-water treatment system to spur job growth.

The city faces a budget deficit of about $100 million in the upcoming fiscal year.

Carlisle repeated themes from his campaign, saying the city needed to rein in spending, while calling on everyone — public workers and the public at large — to share in the sacrifice.

City agencies will continue operating on reduced budgets, although he made no mention of how he planned to end furloughs for county workers.

Speaking to reporters after the speech, Carlisle said pay cuts and layoffs could be on the table.

"Pay cuts are something that have to be considered — absolutely and unequivocally," he said.

Layoffs would be a last resort, he added, saying those issues would be decided at the bargaining table.

"It depends on essentially whether the people who are involved — in terms of the negotiations — if they hold steadfast, then those options will have to be considered," he said.

When asked whether police and firefighters would be asked to share in the sacrifice, Carlisle said, "They are not sacred cows, and they will be looked at as well."

City Council Chairman Nestor Garcia said he agreed with the mayor on many of the issues he touched on in his speech, including the prospects of raising certain user fees and divesting the city of managing its affordable-housing supply.

"We need to take a look at our affordable-housing portfolio," Garcia said. "Perhaps it’s better managed by the private sector, but it has to remain affordable."

Carlisle said the city plans to offer for sale 12 affordable-housing properties to qualified buyers who would continue to operate the properties under existing conditions.

"Is it something that can be looked at in the immediate future? Yes, because people have already expressed interest in taking them over as affordable housing," Carlisle said.

The city also would look at selling off a "significant" number of remnant properties, reducing the city’s long-term borrowing to cut debt and supporting the film and television industry to increase outside investment in Honolulu, Carlisle said.

With the exception of bus fares, Carlisle said the city must look at raising some user fees, but named only one in his speech: the $4.50 public golf weekday greens fee for seniors.

City leaders were adamant in their opposition to any state proposal to raid funds dedicated to the city, including Honolulu’s share of the hotel room tax and funds generated by the 0.5 percent general excise tax surcharge for rail.

Carlisle delivered his speech as state lawmakers advanced a bill to divert rail surcharge funds to the general fund to help balance the state budget.

The bill originally diverted $200 million from the city to the state with a plan to issue $300 million in general obligation bonds to offset the loss of tax revenues to the city and extend the surcharge for two years to 2024. It requires a memorandum of agreement between the city and state.

The Senate Ways and Means Committee advanced the bill with blank amounts, keeping it alive for further discussion.

"Clearly, it was an option that we wanted to keep alive," said Sen. David Ige (D, Aiea-Pearl City), Ways and Means Committee chairman. "We do understand that there is some question from the federal government, and we wanted to make it very clear that the state supports the transit system and we’re not interested in doing anything that would jeopardize that."

Garcia, a former state lawmaker, said council members would keep an eye on the legislation as it moves.

"They have to do what they have to do, and we will do what we have to do in order to preserve taxpayer dollars on this side of the street and to make sure that we take care of our own deficit," Garcia said.