The city’s $1.82 billion operating budget – balanced in part on a tax increase for landlords and others who own property they do not live in – heads to Mayor Mufi Hannemann for consideration as one of his final acts before resigning to run for governor.

City spending would increase by 1 percent over last year under Bill 15, passed unanimously yesterday by the Council.

"We worked very hard to hold the line on spending," Hannemann said in a statement from Washington, D.C., where he was meeting with federal transit officials on the city’s $5.4 billion rail project. "And even though some of the city’s costs have increased significantly, we will be able to protect public health and safety, make prudent improvements to our infrastructure and invest in our future."

Hannemann has 10 working days to decide whether to sign, veto or let the budget become law without his signature. The mayor has said he wants to finish the budget before he resigns to run for governor. By law he must resign by the July 20 candidate filing deadline.

Council members called the budget a compromise that some felt did not cut deep enough into government spending while potentially increasing the financial burden on renters who would be least able to afford higher costs.

Although the budget bill passed by a 9-0 vote, property tax rates are set by separate resolution, which was opposed by three members: Ikaika Anderson, Romy Cachola and Ann Kobayashi.

Resolution 10-60 would increase the rate for the "nonhomeowner" class by 16 cents, to $3.58 per $1,000 of property value, while all other property tax rates remain unchanged.

Although it was below the $3.72 rate proposed by the mayor, administration officials supported the Council’s proposal. Because of lower property value assessments, the administration contends those in either property tax classification should see no change or even a drop in their tax bills.

But Cachola noted the nonoccupant homeowners would be the only class of property owners to see rate increases two years in a row, while Kobayashi argued the new rate would simply be passed on to renters, "hurting the people who need help the most."

Acknowledging that some homeowners might have been grouped into the nonhomeowner class unfairly, the Council also approved a one-time $100 tax credit to property owners who have two dwellings on their parcel. Property owners must be able to claim the standard homeowner’s exemption on at least one of the properties to claim the credit.

Budget Director Rix Maurer III estimated there were about 5,000 residents who would be able to claim the credit.

The separate rate might be short-lived, as Council members already have advanced a proposal to do away with the distinction for the next budget cycle.

"I think there’s strong support for the fact that it’s not a tool that we need – that we need to find other ways to balance the budget," Council Chairman Todd Apo said.