Typical O'ahu homeowners would not have to pay more in property taxes next year unless their assessments have soared by more than 15 percent, under a new property tax rate plan headed for a final vote before the City Council.

Under the right scenarios, many homeowners might even pay less next year, under the plan approved yesterday by the key Budget Committee.

However, a rise in commercial property taxes could eat into any savings if businesses decide to pass their higher tax costs on to their customers.

Although the Council Budget Committee was able to shave 10 cents off a proposed increase in the tax rate for commercial properties , it will still rise from $11.97 to $12.50 per thousand dollars of assessed value, which could translate to more expensive goods and services.

A combination of lowering the residential tax rate by 30 cents per thousand dollars, doubling the homeowners' exemption to $80,000 and offering a $200 tax credit should mean that people who own homes worth $700,000 or less can see their assessments increase by 15 percent without having to face a higher tax bill, according to City Council budget chairman Todd Apo.

"The median housing price now is $660,000 or something like that, so if you're a little bit above the median price, your actual real property tax bill will go down," Apo said.

Even those with more valuable homes could see lower bills if assessments stay stable. "If their assessments stayed the same, then everybody will pay less because its 30 cents less per thousand," said City Council Chairwoman Barbara Marshall.

Some homeowners who have seen their assessments climb steadily for the past five years say the 30-cent rate reduction is not enough.

Ted Kanemori is one of them. He called the dip "a token gesture rather than a genuine effort to help taxpayers."

He asked the City Council to consider reducing the tax rate by at least $1 to offer meaningful help to those who have seen their property values — and tax bills — increase for the past five years while the city has enjoyed a windfall.

"Feel some of our pain," Kanemori said, urging the council to cut expenses rather than pass them on to residents. "Balancing the budget doesn't mean you have to spend everything."

Caron Wilberts, who said she represents the elderly and working poor, said she already has difficulty paying for all the increases in city services and urged the council to do what it could to bring down housing costs.

"I see my neighbors cutting their pills in half and making one pill into two and I am having just as hard a time as they are," she said via e-mailed testimony.

Lowell Kalapa, president of the Tax Foundation of Hawai'i, said the council's plan to reduce residential property taxes and increase the rates for commercial properties not only shifts the burden, but hides it in the costs for goods and services as business owners pass along the cost to customers.

"That cost will be embedded in the cost of living in Hawai'i," he said.

He also disagreed with the assumption that many of the costs would be passed on to tourists, since the costs at grocery stores and other retail outlets frequented by residents would also increase.

Along that theme, City Councilman Charles Djou said, "With one hand we giveth, with the other hand we taketh away."

Councilwoman Ann Kobayashi also had concerns about raising the property taxes for small-business owners, who unlike bigger retailers, could not pass on their costs to customers if they want to be competitive.

"The small businesses are really suffering," she said. "If you look around town, we're losing a lot of those small businesses. Hamada Store just closed in Kaka'ako. Lots of little bakeries are closing. We're down to two bowling alleys. They just can't afford the increased property tax because of assessments.

Jim Tollefson, president of the Chamber of Commerce of Hawai'i, also opposed a nonresidential rate increase.

"The state of Hawai'i is consistently ranked as one of the most expensive states in the nation to do business and another increase in tax rates for nonresidential properties will reinforce Hawai'i's reputation as an expensive place to do business," he said.

Those with agricultural interests unsuccessfully lobbied for a reduction in the rate for vacant agricultural lots when other agricultural land rates have been dropped from $8.57 to $5.70. The committee decided to keep the vacant agricultural land property tax rates at $8.50, significantly higher than some hoped for.

Dean Okimoto, president of the Hawaii Farm Federation Bureau, argued that the tax rates for all agricultural land should be equal to the 3.29 improved residential rate to encourage landowners to remain in agriculture.

Reach Treena Shapiro at tshapiro@honoluluadvertiser.com.