A state plan to improve a dilapidated stretch of Queen Street in Kaka'ako is likely headed back to the drawing board after construction pricing and city design changes inflated the project's cost.

The move delays an effort to transform Queen into a modern transportation artery for the area, but was welcome news for nearly two dozen small businesses who have long opposed the project they are required to help pay for.

"I never wanted to pay the assessment on a project that the general public is going to use," said Cliff Garcia of Tropical Lamp & Shade Co., whose share of the bill is $90,000. "I hope it gets canceled."

The Hawai'i Community Development Authority planned to widen the road, add sidewalks and storm drains, put utilities underground and improve sewer and water lines along the narrow, flood-prone section of Queen between Kamake'e Street and Ward Avenue.

Metered curbside parking, landscaping, lighting and traffic signals at the intersection of Kamake'e and Queen are also part of the project.

But the state agency, which governs development in Kaka'ako, now plans to recommend that its board cancel a construction contract for the work because design changes mandated by the city and higher material and labor costs largely caused the price tag to soar 57 percent from $10.8 million to $17 million.

Daniel Dinell, agency executive director, said the attorney general's office suggested that the contract be canceled because the scope and cost of the project had materially changed. But the agency's board has yet to make a decision.

"The project is not necessarily canceled," he said. "This is a good opportunity to consult with the community and get their input."

On Wednesday, agency personnel will be available to meet with the public to answer questions and receive suggestions on how to proceed at Ward Warehouse's Kewalo Conference Room from 2 to 6 p.m.

The project, known as ID-11, is the ninth infrastructure improvement project to be carried out in Kaka'ako by the agency charged with transforming the old, largely industrial neighborhood into a modern community mixed with commercial and residential use.

Project ID-11 was to be the third of four improvement sections along Queen, which is unsafe for vehicular and pedestrian traffic and also is not conducive to redevelopment, according to the agency.

But the project has been the most contentious of Kaka'ako improvement district plans because it's the first where the majority of landowners being assessed for the upgrade are small businesses.

Of an original $15.6 million total development cost — which included $10.8 million for construction plus expenses for design, land acquisition, management and temporary parking — the state was going to pay 69 percent, or $10.7 million. Utility companies were assessed 12 percent, or $1.9 million. Area landowners were to pay 19 percent, or $2.9 million.

The assessment to landowners was initially higher, but was reduced out of concern for the small businesses from $4.5 million, with the savings going to owners of less than 80,000 square feet of property.

Still, many of the area businesses objected to paying for upgrades they said would result in lost business.

Typically state and county governments don't charge private landowners special fees on top of taxes to pay for public infrastructure improvements, but the HCDA was set up to do so because of the overwhelming improvements needed in Kaka'ako.

Garcia said his store at 977 Queen St. would lose a dozen parking spaces from the road's shoulder if Queen is widened and sidewalks are put in.

"I'm not against improvement," he said. "Queen Street needs improvement. Sidewalks, sewers, I know it's needed. But to me, it's not benefiting us."

Garcia said he prefers the road be improved with sidewalks and drainage but maintained as two lanes. He also would be willing to buy the land now used for parking. But to lose parking and have to pay for other improvements — even though he pays property taxes and sewer fees — doesn't seem right to him.

Garcia and others argued against the project before the state's Small Business Regulatory Review Board two years ago, but Gov. Linda Lingle approved the plan.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.