And everyone could get some relief in the long term under a new way to figure property assessments.

Kailua homeowner Bob Grantham has spent most of his time since tax assessments were mailed in December building a grassroots citizens group dedicated to freezing taxes.

He said yesterday's action will help many citizens who need it. "This is a major problem that affects most of the people," Grantham said.

But Makakilo resident Kioni Dudley said a tax credit that caps the tax for those who earn incomes of $50,000 or less isn't enough.

"The people are asking, 'why can't you freeze the taxes at last year's levels?'" Dudley said.

Some council members differed on which measures offered more hope to taxpayers. But a majority agreed that they were providing a plan for modest improvement.

Council budget chairwoman Ann Kobayashi said the increase in the home exemption for all homeowners is fairer than the existing system. "Those below 65 were not getting their fair share of the home exemption," she said.

YEARS OF TAX HIKES

Yesterday's action set the table for the first tax relief Honolulu property owners have seen since a hot real estate market sent property values soaring several years ago. The vote followed months of complaints after Ho-nolulu property owners received property assessments indicating an average 26 percent increase in assessed values and the promise of yet another year of higher tax bills.

If tax rates were unchanged and no relief was offered, the increased values meant Honolulu would collect $125 million more in property taxes this fiscal year than last.

The three measures now go to Mayor Mufi Hannemann for consideration. Hannemann has indicated that he wants to work with the council to figure out the specifics of giving some money back to taxpayers, possibly as much as $300 to owneroccupants. So, it's not clear whether he will be able to work within the framework of what was passed yesterday.

Today, Hannemann is expected to begin explaining to the council his overall plan for the city in the coming year in his second State of the City address.

MAYOR'S PLANS

Hannemann has proposed devoting about $40 million to give homeowners who currently claim an owner-occupant exemption a one-time tax credit, coupled with a new homeowner's classification to favor residents over people who quickly buy and sell homes.

Hannemann also hopes to put $20 million into a rainy-day or reserve fund, saving the other $65 million to go toward such fixed costs as salaries and debt.

The mayor is scheduled to deliver his budget to the council next week, leaving council members uncertain as to whether Hannemann will work within their proposals or fashion compromise measures.

Kobayashi also expressed optimism that Bill 12 will make a bigger change for the long term by shifting the way assessments are calculated. The measure is opposed by the administration.

Yesterday, city budget and fiscal services director Mary Pat Waterhouse said she couldn't provide an estimate of what the basic tax rate would be under that proposal. "We ran some numbers and it looks like it would come out a little lower," she said.

Councilwoman Barbara Marshall expressed some disbelief that Waterhouse didn't have a firm estimate. And she pointed out the measure would essentially express an idea but leave the mayor and the council free to set the tax rates as they see fit.

"He can set whatever rate he wants as can we," Marshall said.

Kobayashi said Bill 12 is a good start on allowing the city to collect only the money needed to run the city. "This bill is almost like a freeze," she said.

But Marshall cautioned taxpayers that Bill 12 is not "perfect." She said it does not automatically lower taxes even if it sends a strong message that spending should be kept in check.

"It does not guarantee anything," Marshall said.

Before the vote, Linda Ann Watson testified from her motorized scooter that the City Council was headed in the right direction yesterday.

Watson made the trip from La'ie to Honolulu Hale to make sure the City Council heard from taxpayers like her who are on a fixed income and need a tax break.

"I'm not planning to move. But each year it's getting harder," Watson said. "Listen to us taxpayers. Help us."

Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com.