O'ahu motorists would pay 3 cents more a gallon at the gasoline pump under a plan approved 3-2 by the City Council Budget Committee yesterday.

Council Budget Chairman Nestor Garcia said raising the fuel tax is one way to help resolve a $50 million budget shortfall.

Garcia and his colleagues are looking at a combination of budget cuts and tax hikes to balance the budget.

Raising the fuel tax to 19.5 cents a gallon from the existing 16.5 cents would add about $9 million annually to city coffers, Garcia said. The city last raised the fuel tax in 1989 — by 5 cents.

The council must approve the gas tax twice more before it can go to the mayor's desk for his signature, and Garcia acknowledged that he's not sure the plan will pass.

In March, Mayor Mufi Hannemann proposed a $1.8 billion operating budget and called for an increase in property taxes that works out to about a $120 annual hike for the typical family owning a $600,000 single-family home on O'ahu.

Garcia said he preferred a mix of a gas tax increase and a smaller property tax increase.

"Here is an opportunity to try to relieve some of that pressure off of property taxpayers," Garcia said.

Budget Committee members Duke Bainum and Charles Djou voted against the fuel tax increase.

Bainum said he would like to see the council look harder for additional budget cuts so neither property or fuel taxes need to be raised. He has proposed $42 million in savings and cuts, including eliminating about $5.6 million in rail-related expenses and $4 million from an account used when the city loses a lawsuit.

"Raising the fuel tax is going have some real ripple effects on our economy," said Djou, who has proposed a 5 percent across-the-board budget cut. "Now's not the right time to raise taxes, period," he said.

'HARD TO RECOUP'

Gareth Sakakida, managing director of the Hawaii Transportation Association that represents trucking and bus companies, said a gas tax increase during a down economy will be hard to absorb.

In addition to the city tax, Hawai'i residents pay 18.4 cents per gallon in federal fuel charges and 17 cents a gallon in state fuel taxes.

Sakakida said his group's research shows O'ahu's combined per-gallon fuel tax is among the highest in the country, adding that the state and federal governments are also looking at raising their charges.

"Those kinds of impacts are hard to recoup even in normal times," Sakakida said.

Councilman Gary Okino, who voted for the fuel tax yesterday, said he's not wedded to the plan.

City Budget Director Rix Maurer III said the Hannemann administration had not yet studied a fuel tax increase fully enough to offer a position on it. The administration did not look seriously at increasing fuel taxes to balance the budget because it wanted a more steady source of income, he said.

The committee deferred a vote on property tax rates until Monday, when it is set to finish its work on the rest of the budget plan.

2 RESIDENTS TESTIFY

Only two O'ahu residents testified yesterday on the proposed property tax hike and both opposed them.

One of them, Paul Smith, said the city should furlough employees to save money.

Overall, the budget submitted by Hannemann is 0.28 percent more than the budget approved by the council for this year. Much of the budget shortfall is the result of nondiscretionary issues including previously approved raises tied to collective bargaining contracts, increases in employee health and retirement benefits, and a drop in hotel room tax and interest revenues the city receives.

The administration has said that its original budget for the coming year was $128 million short, and that it was reduced to a $50 million shortfall only after spending restrictions, a hiring freeze and other budget belt-tightening.

Garcia said he wants to pass some kind of tax increase this year because he's troubled at the prospect of needing to push through a larger tax increase next year, when the city is projected to have a $170 million shortfall and many of his colleagues are up for re-election.