Honolulu Mayor Kirk Caldwell wants to raise tax rates on owners of luxury homes and hotel/resort properties to help close a $46 million revenue "gap" and balance a proposed $2.15 billion operating budget for next year.

Other property owners, including all who live in their homes and receive a homeowner’s exemption, might not see higher rates, but are likely to see higher tax bills. City officials said a 7.5 percent increase in Oahu property values across all tax categories is projected to generate $62 million more in cash for the city.

The $2.15 billion 2015 operating budget Caldwell submitted to the City Council on Friday, a day ahead of the mandated March 1 deadline, is about $77 million, or 3.6 percent more than the proposal he presented last year.

Besides higher tax rates, Caldwell is attempting to kill off what was once a $156 million shortfall by eliminating 618 vacant but funded positions and, despite objections by the Council, plans to institute a $10 monthly garbage pickup fee and to charge for advertising on the sides of city buses.

Caldwell also submitted a $640 million capital improvements plan. Like the $623 million construction budget he submitted for this year — a plan the Council boosted to $635 million by the time it approved the proposal — next year’s construction plan is short on frills. About 36 percent of the funding goes toward improvements mandated by a federal consent decree.

The budget package "focuses on core services … infrastructure — not nice to have, but need to have," the mayor said. "Road repaving, fixing sewers, making more bus routes available to the public, fixing up our parks better but at the same time exercising strong fiscal prudence."

Caldwell repeatedly used the words "fiscal discipline" to describe his budgets.

Some 37 percent of the city’s $2.1 billion operating budget is tied to debt service and employee-related expenses such as Social Security and Medicare, health care and pension costs, what the city calls "nondiscretionary funding." Public safety programs, including police, fire, ambulance and ocean safety services, make up 19.5 percent of the budget, while sewer and trash operations take up about 13.9 percent of the budget.

Raises in pay and fringe benefits for the city’s approximately 10,000 employees, tied to collective bargaining contracts reached with government worker unions in the last year, will cost taxpayers about $50 million more next year, Caldwell said.

To help make up the difference, the mayor first announced at his State of the City address Wednesday his plans to save $37 million annually by deactivating 618 vacant but funded positions, essentially deleting them from the city’s ledgers permanently, and halting funding for an unspecified number of other vacant jobs.

Agencies researched the positions, going back five years.

A list of planned deactivated positions distributed to reporters Friday showed the Department of Facility Maintenance losing 120 positions, the largest hit both in terms of actual positions and percentage hit (15.5 percent). Many of those have been vacant for five years or more, Facility Maintenance Director Ross Sasa­mura said.

Both the Police and Fire departments are also slated to lose vacant positions. The Hono­lulu Police Department would lose 100 vacant positions, 69 of them sworn police officers, while the Ho­n­olulu Fire Department would lose 25 positions, all firefighter posts. They constitute 3.7 percent and 2.1 percent of their respective department’s workforces.

Shinn said the administration was assured by both Police Chief Louis Kea­loha and Fire Chief Manual Neves that the cuts would not affect their departments’ response to emer­gen­cies. He noted that the number of recruit classes to be conducted in 2015 by both agencies are expected to return to what they were a year ago when they were trimmed back for budget reasons.

With about $46.6 million left to make up after exhausting its streamlining and budgeting efforts, the administration turned to taxes and fees.

Under the operating budget plan, the owners of about 7,300 residential properties under a new "Residential A" tax class, defined as those properties valued at $1 million or more and not receiving a homeowner’s exemption, would see tax rates rise to $5.50 per $1,000 of valuation from the current $3.50 per $1,000, which would net the city about $26.4 million. An increase in the hotel/resort class rate to $13.40 per $1,000 of assessed value, up from $12.40, would raise $8.2 million. It would be the first rate increase for the hotel/resort class in more than five years.

Most homeowners, specifically those who receive homeowner’s exemptions by virtue of living on their properties, and/or own residential properties valued at less than $1 million, would not see an increase from their existing tax rate of $3.50 per $1,000.

Caldwell is also programming projected revenues that have already been killed, or on life support, by the Council. The first, allowing the city to begin charging property owners a $10-a-month garbage fee, is projected to raise $20 million annually, or $10 million in the coming fiscal year since it wouldn’t kick in until Jan. 1, six months into the new fiscal year. Those nonprofits and owners of condominiums and apartments who pay for city ref­use pickup would also need to pay more. The bill was deferred indefinitely by the Council Budget Committee on Wednesday after members said the idea was universally panned by their constituents.

The second, to allow the administration to raise revenues by selling advertisements on the sides of buses, is projected to raise $1.5 million in the coming fiscal year for bus services. After heavy lobbying by the Outdoor Circle, that measure was shelved by the Budget Committee on Jan. 17. Council Budget Chairwoman Ann Koba­ya­shi left open the possibility that she may resurrect the bill depending on how budget deliberations go.

Caldwell urged Council members to look at the larger picture and reconsider the two proposals as well as other ideas. "If they don’t like them, they need to come up with ways of balancing the budget through other means or by cutting services," he said.

Among other highlights of Caldwell’s budget package:

» $18.9 million for a city Housing First program to provide shelter for those with the most dire needs in the homeless community. Council Chairman Ernie Martin and Koba­ya­shi said Wednesday they believe the administration is allocating too much money into a program aimed primarily at helping individuals with mental illness, drug addictions and other issues when homeless families are in need of more help. Caldwell insisted Friday that Housing First initiatives help children and families as much as individuals.

» $39 million in capital improvements for parks, including $5 million for revitalization of Ala Moana Regional Park, Thomas Square and the "Blaisdell Cultural Corridor."

» $20.3 million for transit-oriented development projects along the city’s $5.26 billion rail line and $4.4 million in operational costs.

» $140 million for road repaving.

» $500,000 for projects aimed at energy conservation and alternative sources.

Council members Ikaika Anderson and Stanley Chang, who, along with colleague Joey Mana­han, are among seven people running for the 1st Congressional District’s Democratic nomination this fall, stood with Caldwell at Friday’s news conference. They applauded segments of the mayor’s budget while raising skepticism about other parts.

Anderson said he appreciated Caldwell’s move to eliminate a large share of vacant funded positions. Long criticized by Council members who felt vacant funded positions were a way for city agencies to tuck away cash for other purposes, the number of such positions was slashed in half, and Council members curbed the way the money could be used. Anderson said he is willing to consider the arguments for raising tax rates on Residential A and hotel/resort owners but believes the calls for bus advertising and a ref­use fee are "in serious trouble."

Chang applauded Caldwell’s focus on using best business practices to balance the budget and to focus on core city services such as homelessness, repaving and fixing sanitation issues at city parks. Chang said he is not sure he will support increasing rates for Residential A property owners. "In Hawaii a $1 million home can be a very modest, old family property," he said. "I think it’s deceptive to use a cutoff of $1 million." 

A proposal introduced by Mana­han last year to raise the minimum value for Residential A properties to $1.5 million was shelved by the Budget Committee.

Council Chairman Ernie Martin, who did not attend the news conference, said while he is not surprised that Caldwell included bus advertising and garbage fees as revenue sources in his budget, "the support is not there for either one."

Martin said he anticipates hotel and resort owners to "ask for some kind of relief."

Noting that the Council shaved the amount Caldwell set aside for road repaving last year, he said he’d rather some of that money go toward park improvements.

Caldwell said that for the first time, budget officials called on city departments and agencies to use "zero-based budgeting," where decision-makers build a budget from scratch and add on based on needs and priorities rather than the standard method of starting each year from what was allocated the previous year.

"The private sector uses this model all around the country; most governments do not," he said. Agency heads were told "you need to start at zero dollars and justify every single dollar you want, why you need it and how you’re going to spend it."