Property values were down across the board on Oahu, meaning fewer tax dollars for city government and a potential move to raise property tax rates for a second straight year.

But homeowners who live in their homes might catch a break from steep increases on their next tax bills.

Legislation approved this year by the City Council and Mayor Mufi Hannemann creates a separate “;homeowner”; class for real property taxes — a move aimed at separating rates for owner-occupants versus landlords, investors and speculators.

The Hannemann administration asked for the separate class, calling it a tool that could generate additional tax dollars without putting the brunt of the burden on homeowners who live in their homes.

It would be up to the City Council to set any new property tax rate.

“;Now that we have some real numbers, we can run some true scenarios about what it does and doesn't mean to use it,”; City Council Chairman Todd Apo said yesterday.

Apo said it was too early to say exactly what actions the Council might take to try and address an estimated $140 million shortfall in the next budget.

“;Obviously, it's going to have an impact on what we need to do with rates in order to have revenue for city operations,”; Apo said. “;But this type of drop always helps government look at how to further cut the budget and how you cut expenditures.”;

He added that the drop in assessments was not surprising. City officials had based future budget projections on a 10 percent drop in property values.

Overall, property values on Oahu were down about 6.7 percent from a year ago, the city said yesterday in a news release.

The total gross assessed valuation of all taxable real property on Oahu decreased to $178.3 billion for the current fiscal year from $191.2 billion a year earlier. The decrease was due to an overall decline in all real property assessments, officials said.

Residential property gross valuations, both homeowner-occupied and non-homeowner-occupied, decreased about 7.7 percent to $143.4 billion from $155.3 billion.

Meanwhile, hotel and resort property values decreased 13.2 percent, while commercial and industrial properties dropped in value by 1.9 percent and 3.6 percent, respectively.

“;I think, basically, it's a mirror of our economy — our local economy, statewide and even national,”; said Gary Kurokawa, administrator of the city's Real Property Assessment Division.

Council Budget Chairman Nestor Garcia noted that property owners may appeal their assessments, and the final numbers might change, but he was encouraged that the decrease was not as low as the city's 10 percent projection.

“;In the end, if we are not careful, we could still be looking at significant reductions to our city budget and the services we now offer to our residents,”; Garcia said in a statement.

Garcia said he already has informed the mayor's administration of his intention to explore further cuts in nonessential services once the budget committee resumes work next year.

Councilman Charles Djou, a frequent critic of government spending, said the city should reduce spending at a rate equal to the decrease in property values, but he did not expect that to happen.

“;Unfortunately, I fear the city administration and majority on the City Council will react to the decrease in property valuations with a massive tax increase on the public during this recession,”; Djou said in a news release.

Any tax hike would come on the heels of a 13-cent rate increase passed this year.

The Council voted to raise the rate for residential property taxes to $3.42 per $1,000 of property value, with no tax credit for homeowners as in past years to offset the increase. Hannemann, who had proposed a rate of $3.59 with a $75 tax credit, allowed the Council's rate to become law without his signature.