KAILUA — State and city negotiators have revived efforts to resolve an ownership dispute that has slowed down the $5 million Kawai Nui Marsh restoration project, and progress was made during a meeting last week, officials said.

"I'm confident we're going to have a resolution because I believe all the parties are committed," said Peter Young, director of the state Department of Land and Natural Resources. "This has been unresolved for too long."

Young said he has a meeting with the city administration later this month and hopes a commitment will be made.

The Army Corps of Engineers has said federal startup money for the project is in jeopardy if the city and state can't settle a decade-long land ownership dispute.

The initial $700,000 request for the pond restoration and waterfowl habitat project is working its way through Congress.

But the Corps of Engineers says it's difficult to lobby for the funding because the state still doesn't own the land.

The project was first announced in 1997 and was expected to begin in 2000.

With plans 90 percent complete, the Army corps is ready to proceed with construction and has requested the $700,000 in initial funding.

The project would create about 40 acres of ponds behind Castle Medical Center and along Maunawili Stream on state and city land.

A total of 11 ponds would be built, and 2,800 feet of stream bank habitat would be restored. The project also involves installing waterbird protection fencing, implementing a predator-trapping program, controlling vegetation and assuring a water supply.

Transfer of the 830-acre marsh from the city to the state was mandated by a 1990 law.

But the hold up concerns negotiations between the city and the state Department of Land and Natural Resources over who would take responsibility for a flood control levee that spans the width of the marsh next to homes in the Coconut Grove area of Kailua town, the Oneawa Canal and Kawai Nui Stream.

The city is willing to transfer the land, but it wants the state to accept responsibility for the maintenance and liability associated with the flood control project, including the levee and the Oneawa Canal, said Laverne Higa, director of the city Facility Maintenance Department.

She said the city would keep control of Kawai Nui Stream.

"I'm willing to transfer, but with the enjoyment of the property for their use comes the liability and maintenance," Higa said. "Why would the city give somebody land and keep the liability?"

The Army Corps of Engineers built the 8-foot levee in 1966 to protect against flooding, and after the 1987 New Year's Eve flood, the corps added a 4-foot wall on top of the levee to protect against larger storms.

Flood improvements are now maintained by the city and DLNR would like that to continue, Young said. He added if that can't be finalized, he would at least like to obtain a perpetual easement for the project land to move ahead with construction.

Young said DLNR wants to manage the marsh, continue making improvements and make sure the community is protected from flooding.

Higa said concern about the federal funds is unwarranted because the federal money for the project hasn't been awarded yet, and the state money that has been allocated can't be taken away except through legislation.

She acknowledged that both agencies have concern over the cost of maintenance because of tight budgets and that has affected negotiations, but the city wants to move forward and find a solution.

"We're trying to make it work," she said. "We're trying to follow the bill but it's a very complex issue."

Reach Eloise Aguiar at eaguiar@honoluluadvertiser.com.