The City Council gave its blessing to the issuance of $104 million in general obligation bonds for the rail transit system but also voted to put controls on the upcoming rail authority’s budget.

The Council voted 6-3 to allow the city to issue bonds to get working capital as construction for the $5.3 billion system is expected to ramp up. Council members Tom Berg, Romy Cachola and Ann Kobayashi voted no.

The earliest the city would issue the bonds would be in September 2012, said Toru Hamayasu, chief of the city Rapid Transit Division.

The Council also passed the operating and construction budgets for the Hono­lulu Authority for Rapid Transportation; Berg cast the only no votes on both bills.

The bills contain provisions giving the Council oversight over the rail authority’s spending. Mayor Peter Carlisle has said he will veto it, and both sides have said the issue will likely go to court.

The administration said the Council’s oversight goes against the City Charter amendment approved last year that created the 10-member board. The charter amendment’s author, state Sen. Donovan Dela Cruz, a former councilman, has said his intention was to keep oversight with the Council.

Yesterday, city Managing Director Douglas Chin stopped short of saying the administration is willing to go to court over the issue.

“What we need to do now is take a look at the floor draft that’s been passed out and see whether it is consistent with what the mayor has promised to the public when he spoke in favor of the charter amendment” that established the rail transit authority, Chin said. “Also whether it’s consistent with the City Charter.”

Chin quoted the charter amendment, which states, “The authority shall have management and control over the monies made available to the authority from the special transit fund.”

“That’s always been our point,” Chin said. “The money in the transit fund belongs to the transit authority.”

The authority is to take control of the project from the city Rapid Transit Division on July 1.

The City Council also approved operating and capital budgets for fiscal 2012 last night. The city will have $1.93 billion for its operations and will see $545.8 million in capital improvement projects.

There was also considerable debate over a bill that would reinstate, in part, a disposal fee discount given to companies that recycle materials and dispose of nonrecyclables at the Waimanalo Gulch Landfill.

Carlisle signed a bill earlier this week eliminating the discount of 80 percent of the “tipping fee.”

But on Friday the Council reinstated most of the discount by passing Bill 36 in a 7-2 vote, with Councilmen Berg and Breene Harimoto voting against it. It would restore the discount at 60 percent for the next fiscal year, 40 percent the year after and 20 percent in subsequent years.

Bill 36 has been criticized as favoring one company, Schnitzer Steel Hawaii, which has received about $19 million in tipping fee discounts since 1998.

“This bill gives one of the richest companies in the country $2.5 million,” testified James Nutter, owner of Island Recycling. “Would you give Microsoft $2.5 million? If this bill passes, my company will make $50,000. But I’m in opposition of this bill because it’s morally, ethically wrong.”

Councilman Stanley Chang, who introduced the bill with Kobayashi, said the bill phases out the discount. The bill also allows the Council to review the effect of the discounted fees and decide whether it should be repealed.

“That’s a program I’m comfortable with,” Chang said. “I think this particular measure is a reasonable compromise to that effect.”

The Council also voted to maintain the mayor’s proposed real property tax rate of $3.50 per $1,000 of property value — an 8-cent rate increase for residential property owners who live in their homes but an 8-cent decrease for owners who don’t.

The Council also approved a bill that tightens requirements for receiving a tax exemption for historic homes. Although many homes are valued in the millions, most homeowners getting the break pay only $300 a year in property taxes, in return for the owners preserving the properties.

Monitoring of the properties has been loose, so the bill aims to help with enforcement. But community advocate Holly Huber said the bill doesn’t do enough, and that it allows commercial use of historic homes.

“This bill caters to special interests,” she said. “This is not reform. This is like letting the oil companies write their own environmental regulations.”