City transportation Director Wayne Yoshioka yesterday faced mounting criticism over the city's decision to withhold an unfavorable financial report on Honolulu's planned commuter rail project from the City Council and the public.

However, Yoshioka said the city was right to keep a lid on the May 1 financial report that projected a $500 million shortfall in tax collections needed to pay for the $5.3 billion elevated train from East Kapolei to Ala Moana. The report was recently released by the Federal Transit Administration under the Freedom of Information Act and reported in The Advertiser yesterday.

"This is not a public document. It is an internal draft," Yoshioka said. "The only reason why it was released is because there was a Freedom of Information Act request to the FTA and they had no choice (but) to release it."

The projected shortfall was in large part due to the current economic downturn. The city sent the financial report dated May 1 to the FTA, but Yoshioka told City Council members on June 10 that an updated financial report was not ready to be released. Yoshioka also testified at the time that the project was not experiencing a shortfall.

Yoshioka yesterday said the May 1 report was not final and an upcoming September final report will address the $500 million shortfall in tax collections.

"We still believe it was really not appropriate to discuss this May 1st version of the financial plan" with the City Council, Yoshioka said. "It was a work in progress. Given that, it would be misleading to share information."

Two council members yesterday said the city should have been forthcoming about the projected $500 million shortfall.

City Council chairman Todd Apo and Councilman Charles Djou held a joint news conference at Honolulu Hale where they said the rail project should move forward despite the city's failure to release the information.

"I don't think it necessarily jeopardizes the rail project yet, as to whether or not the city does it," Djou said. "What I think it does is it clearly jeopardizes the public's confidence in the Hannemann administration's ability to do this project properly."

Djou pointed out that on June 10, Yoshioka told council members that the financial picture for the transit project was fine.

"This undermines the integrity in the process and the confidence in the rail system," Djou said yesterday.

Apo agreed, saying, "I think more should have been said at the June 10 meeting. I am uncomfortable with what happened on June 10, regarding the testimony relative to this report. As much as we need to figure out what happened in the past, I am going to remain more focused on how to make this process going forward work correctly for the council and the public."

Yoshioka, at a separate news conference yesterday, said the May 1 report was outdated and that a recently filed updated plan sent to the FTA contained more up-to-date financial details. The city yesterday would not release the new report or explain how it plans to address the shortfall in tax collections discussed in the May 1 report and a subsequent July 15 e-mail from the city to the FTA.

"The plan that was sent to FTA perhaps last week was just like ... the May 1st one — it's a work in progress," Yoshioka said. "When we're in work in progress, we're not going to be talking and discussing the numbers until we have a situation where everybody feels that there's some consensus that these are the numbers that are accurate."

The FTA yesterday did not return messages seeking to verify the existence of a more recent financial report from the city. The FTA is the agency that will determine if Honolulu can get more than $1.4 billion in federal money to help fund the rail project.

U.S. Rep. Neil Abercrombie, D-Hawai'i, yesterday said he is worried about the apparent lack of transparency. Abercrombie said he fears that opponents will have an opportunity to kill the rail project because of the way it is being managed.

"I'm concerned the project is going to be Superferried," he said in reference to the demise of the Hawaii Superferry, a high-speed, interisland shuttle service.

According to the May 1 report and a July 15 e-mail, the city is trying to convince federal officials that it can pay for the project even with the drop in tax revenue.

As part of that effort, the city has raised the possibility of new taxes, fees for development rights and the possible use of military and airport funds to pay for the train. The city also has raised the prospect of extending the sunset date of the current half-percentage-point transit tax beyond 2022 and keeping some of the 10 percent transit tax administration fee that's being retained by the state.

The city, in a news release yesterday, said the drop in tax collections now "does not mean collections will be lower a few years from now. Furthermore, construction costs may be substantially less than earlier projections, because of the poor economy and engineering refinements to the project."

City Council member Donovan Dela Cruz faulted both the city and the council for the lack of transparency on the rail project. He said the council should require the city to provide monthly updates on the status of the project.

"Transparency and accountability are critical. The more transparency we have, the more confidence we can have in the project — warts and all," Dela Cruz said.

Gov. Linda Lingle yesterday said she is willing to sit down with the city to discuss ways to find money to make up for the lower excise tax revenues. However, it's unlikely that the state would be in the financial position to give the city financial help at this time.

Lingle also said extending the half-percentage-point excise tax beyond a 2022 sunset date to pay for rail would send the wrong message to taxpayers.

"I think what happens when you extend a tax that you promised would be for a limited period of time is that the public loses confidence in government, and government's word when they give it," she said. "And it reinforces that idea that don't ever believe what government says about taxes because it'll just be forever."

Lingle said it's up to the city to decide whether to continue with the rail project.

"So I think the city's going to have some soul-searching to do at this time, both the mayor and the council, in making a decision on what direction to take," she said.