An apparent agreement announced yesterday on how to collect $150 million a year in new transportation taxes clears the biggest remaining hurdle in the city's long-delayed plans to develop mass transit on O'ahu, Mayor Mufi Hannemann said.

"My only worry was being bogged down in the tax situation," Hannemann said. "Now, I don't think there's any other concern out there — not costs or ridership or station location — that can be a show stopper."

Under the tentative agreement, the state will collect the new county surcharge on the general excise tax beginning Jan. 1. Ninety percent of the money generated by the surcharge — which raises the excise tax in Honolulu from 4 to 4.5 percent for 10 years — will be turned over to the city to pay for the new mass transit project.

In recent weeks, Hannemann and Gov. Linda Lingle had been feuding over who would pay the administrative startup expenses involved.

A breakthrough in the dispute came Monday when state legislative leaders assured the city they would work next year to approve an appropriation of $5 million to cover the administrative costs, Hannemann said.

Bob Awana, senior adviser to Lingle, said the key provision in the agreement involves the Hannemann administration asking the City Council to approve a $5 million guarantee to pay the state's contractor if the Legislature does not authorize the money.

"We're very close to an agreement," Awana said. "We agree in concept; we've just got to put the nuts and bolts in place. We never said we wouldn't collect the tax. The issue has always been assuring we had funds to pay the vendor for the work."

Transit supporters were buoyed by the announcement of the agreement but vexed that it was so long in coming.

"I'm happy that we're moving forward, but annoyed that we had to waste so much time and taxpayers' money to get to this point," said Maeda Timson, chair of the Makakilo-Kapolei-Honokai Hale Neighborhood Board. "I hope now that everyone will just stop being silly and get on with their work."

"Sometimes, we make things so unnecessarily complicated," added council member Nestor Garcia. "Traffic is simple. We have to keep moving forward."

Councilman Todd Apo said a City Council meeting scheduled for today now will be held to discuss the new tax agreement. Final City Council approval of the plan could come either today or at another special council meeting scheduled for July 7, he said.

Apo said the he hopes there won't be any more problems with the funding.

"But until it's all signed and done officially, you never know what can happen. This is politics," he said.

The excise tax surcharge, which goes into effect Jan. 1, 2007, is expected to be the primary funding mechanism for what eventually could be a $2.7 billion mass transit system running between Kapolei and the University of Hawai'i-Manoa. Hannemann said he also will seek federal funds and public-private partnerships to help pay for the system, scheduled for ground-breaking in 2009.

The city is expected to begin a series of public meetings Saturday announcing some details of its transit plan, including the first estimates of costs and potential ridership.

Reach Mike Leidemann at mleidemann@honoluluadvertiser.com.