A bill creating a homeowner property tax category moved out of the City Council Budget Committee this week but could soon run into troubled waters.

The bill advanced 3-2 on Wednesday, with Todd Apo and Charles Djou voting no. Budget Chairman Nestor Garcia said he has "strong reservations" and was voting for the measure primarily to keep the discussion going.

The measure goes back to the full council for the second of three votes.

Mayor Mufi Hannemann is seeking the homeowners classification, arguing that it would allow the city to give tax breaks to people who live in the homes they own.

"A homeowner class, together with exemptions, is a prudent way to provide tax relief to residents who have occupied their homes for years," Hannemann said in a written communication to the council. The mayor noted that Hawai'i's three other counties have had a separate class for owner-occupants for more than a decade.

City property taxes are determined by multiplying a property's value by a tax rate. Owners of all residential properties on O'ahu this year will pay $3.42 for every $1,000 of valuation on their parcels, regardless of whether they live in them. Owner-occupants, however, can apply for a "homeowner's exemption," which allows them to take $80,000 off the value of their properties before the tax is calculated. Other exemptions are also available, most notably to senior citizens.

Djou and Apo think establishing an owner-occupant classification makes it too easy politically for the city to raise the rates on the other tax classifications.

"By setting up a separate homeowner's rate, the reality is, politically, you'll never raise the homeowner rate because those are your voters, and you'll shift the burden to non-homeowners and non-residential properties and we've seen that historically," Apo said.

"This is a Trojan horse to raise taxes," Djou said, adding that commercial property owners have had to bear the brunt of tax increases over the years.

Opponents said the homeowner's exemption already provides a mechanism if the city wants to offer more relief to owner-occupants.

They also think a separate tax rate for owner-occupants ignores that a large percentage of Hawai'i residents are renters, who could see higher rents if their landlords pass on tax increases to them. The administration has dismissed that claim.

Djou said an exemption is fairer because the flat amount ensures those with lower-valued homes, ostensibly those who need relief from taxes the most, gain the most from it. Djou, a Republican, said he also believes in the principle that there should be as few tax categories and rates as possible as a point of fairness. "Ideally, real property is real property," he said.