Repair work and higher rental rates appear close to approval for the commercial small-boat harbor at Kewalo Basin, after almost three years of contention between harbor users and the state.

Objections to the plan haven't dissipated despite efforts to address concerns. But the state agency inheriting responsibility for the harbor has obtained key support from the state Small Business Regulatory Review Board, which last year opposed a prior draft of the improvement plan.

The review board's approval, though made with reservations, enhances the likelihood that the proposed harbor rules will be signed by Gov. Linda Lingle.

Anthony Ching, executive director of the Hawai'i Community Development Authority, which has been ordered to take over control of the neglected harbor from the state Department of Transportation, expects the transfer to happen in the first quarter of next year followed by two years of work to repair dilapidated slips.

Ching, who joined the agency in January with the Kewalo project stalled by litigation, said he's pleased that the operating plan is moving forward.

"It's in our interest to make the commercial harbor work as best as it possibly can ... and get a fair return on what is a public asset," he said.

The $4.9 million repair plan mainly involves demolishing one pier and replacing and extending three piers in the 127-slip harbor where about 45 slips can't be used because of long-neglected maintenance by DOT.

Under a planned two-tier slip fee structure, the harbor's roughly 80 existing tenants would pay 12 percent more for their slips, most of which were previously improved and won't be replaced, while new tenants would pay double the present rate for slips that are rebuilt and returned to service.

The harbor plan also includes managing harbor operations with a private contractor, and offering available space to recreational boaters if commercial boaters, who get first priority, don't fill the slips.

The HCDA said raising slip fees is necessary to properly maintain the harbor, and that a 12 percent increase for existing tenants represents about half the rise in the consumer price index since slip fees at Kewalo were last raised in 1996.

Earlier this month, the HCDA's board of directors adopted the proposed changes, and next month expects to name a private firm to manage harbor operations.

A group of tenants formed a nonprofit association called Kewalo Ocean Activities. The group sued HCDA last year to block the improvement plan, but a judge ruled in favor of the state in May, though the association is appealing.

The agency has been preparing to take over harbor operations since November 2005 after the DOT, which had run Kewalo Basin since the advent of statehood, said state law requires HCDA to take over because that agency owns the property. HCDA, which oversees development in Kaka'ako, was given ownership of the harbor in 1990 by the Legislature to facilitate comprehensive redevelopment of the Kaka'ako peninsula.

Initially, HCDA proposed spending $14.1 million to repair unusable slips and add new restaurants, a convenience store, fuel station, bait shop, better car and bus access and other improvements financed by a 100 percent rent increase for all slips plus maintenance fees.

Harbor users proclaimed the plan, intended by HCDA to make the harbor more inviting and theoretically better for businesses there, would put them out of business. Concerns expressed during several stakeholder meetings led to repeated revisions that eliminated elements including maintenance fees and most amenities.

The scaled-back version also dramatically reduced proposed levels of insurance and minimum sales that harbor tenants must maintain, and eliminated fees for transferring a business to a new owner.

Still, many harbor users oppose the plan's present version. "The rule package is seriously flawed," said Capt. R.A. "Reg" White of harbor tenant Paradise Cruise Ltd.

White's biggest objection is the two-tier rate schedule and the strategy to make harbor tenants pay for improvements that he said the DOT should have made using harbor revenue.

Last year, the Lingle administration authorized the DOT to spend $5.5 million on Kewalo Basin repairs, but the DOT argued that state law prohibits it from spending the money on a harbor it doesn't own.

Ching said he's researched the funding issue and is convinced that HCDA will have to finance the repairs.

HCDA estimates its repair plan will cost $4.9 million, which would come from its general Kaka'ako improvement spending account that would be repaid over 12 years using harbor revenue.

The Small Business Regulatory Review Board, however, recommended that Lingle approve the harbor plan but ensure that HCDA gets $4.5 million from the DOT for the project so the cost doesn't fall on harbor users.

Some members of the review board, according to minutes of a July meeting, expressed concern about the slip fee increases, including board Chairwoman Lynne Woods, who said it was highly likely in her view that some companies at Kewalo would go out of business because of the planned changes.

White is hopeful that an HCDA commitment made earlier this month to form an advisory group between harbor tenants and agency directors to consider additional plan revisions — including slip fee increases and commercial boat priorities — will lead to more acceptable harbor rules once the repair work is complete.