A report to the FTA in May projected a $500 million shortfall in tax collections for rail.

Construction on the 20-mile train from Kapolei to Ala Moana is to begin in December, but the city is balancing finances for the project in a weakened economy marked by declining visitor arrivals and real estate values.

City transportation Director Wayne Yoshioka last week insisted that information from the report and e-mail, which were released by the FTA under the Freedom of Information Act, should not have been made public. Yoshioka said the documents were outdated by a new report that the city will not release or discuss until next month at the soonest.

Bill Brennan, a spokesman for Mayor Mufi Hannemann, reiterated yesterday in an e-mail the city's position that the numbers released by the FTA were outdated.

By the time the updated version of the city's May 1 "Financial Plan for Entry into Preliminary Engineering" report comes out, the outlook for tax collections may have worsened. On May 28, after that report was finished, the state Council on Revenues reduced the forecast growth rate for general fund tax revenues for fiscal 2010 from 0.5 percent to 0.0 percent. In July — the first month of fiscal 2010 — state revenue collections were off 3.9 percent.

The council could revise its forecast again at a meeting scheduled for Thursday.

OUTLOOK 'DOUR'

Lowell Kalapa, director of the Tax Foundation of Hawai'i, said it's unlikely the Council on Revenues will revise its tax collection estimates to reflect a near-term increase in tax collections.

"The outlook is still quite dour," he said. "I think we're looking at lower (estimates). What economic activity is going to boost (general excise tax) revenues? I just don't see it happening."

The FTA will determine whether Honolulu can get more than $1.4 billion in federal money to help the project, and in the July 15 e-mail an unidentified city official outlined possible sources of revenue to close the gap.

"It's my understanding that some concerns remain at FTA about strength of the revenue side of our financial plan and the effect that the slower economy will have on our excise tax forecasts," the first sentence read.

In that e-mail, the city mentioned extending the half a percentage point general excise tax surcharge beyond its original 2022 expiration date, but officials have indicated that avenue had been rejected.

In response to another option in the e-mail to divert more than $300 million in federal funds intended for TheBus, the city said in a press release:

"The city will not use the bus funding if it would in any way compromise the quality of the city's bus service," attributing the quote to Toru Hamayasu, city Department of Transportation Services deputy director. The city also said in the release, "There are various opportunities available to fill any funding gaps for rail or bus service, and all options are being prudently explored."

The July e-mail indicates city officials were also considering other ideas, including: raising $60 million in private investments to build three of the rail stations, getting $150 million from the airport, boosting the federal contribution to the project to as much as $1.7 billion, and lowering the amount of transit tax retained by the state.

After a Honolulu Advertiser story Thursday about the city's May projection and possible options, Gov. Linda Lingle and state Senate President Colleen Hanabusa, D-21st (Nanakuli, Makaha) indicated they were unlikely to agree to reduce the state's 10 percent share of transit tax proceeds. The state is grappling with its own deficit, which the administration has estimated at $786 million through June 2011.

"Good luck," Hanabusa said during the Rick Hamada show on KHVH 830-AM when asked whether the state would give the city more money for the train. "I can't imagine that they're serious about asking the state for money. Are you kidding?"

LANDOWNERS' VIEW

Last week Brennon Morioka, state Department of Transportation director, ruled out providing airport funds to finance the train.

It's also unclear whether private landowners and developers would be willing to kick in money.

"On the surface of it, the answer would be not very likely at this point in time," said Bill Paty, a trustee with the Mark A. Robinson Trust, which owns a controlling interest in the land under Don Quijote's Waipahu store and other Waipahu parcels adjacent to a planned station.

"Looking to the landowners to substantially make up the deficit on that would be a tall stretch. It would have to be balanced out in some fashion or other, but I don't think in terms of our trust here that we would look favorably on it."

The University of Hawai'i-West O'ahu, which also will be near a station, has problems raising money building its new campus. D.R. Horton Inc., another major landowner that could benefit from rail, isn't expected to find out if it can reclassify its 1,600-acre Ho'opili master plan community from agricultural to urban use until late this year or next year.

Kamehameha Schools, the state's largest private landowner, said the city should explore a cheaper, partially at-grade rail system.

"We have shared information with the city that indicates there may be substantial construction savings with a flexible light-rail system that combines elevated with at-grade sections," said Kamehameha spokeswoman Ann Botticelli in a statement. "Before asking for large contributions from the private sector, we encourage the city to explore alternatives to the purely elevated system it has selected to make sure it has identified the most cost-effective technology."

In addition to seeking out more revenues, the city is expected to try to shave costs.

City Council Chairman Todd Apo said he was told by Yoshioka that the $500 million shortfall is outdated.

"What wasn't factored in there was some of the cost savings that we're also seeing," Apo said during a news conference. "As much as the economy has caused revenue shortfalls, it's also caused construction costs savings. And so part of that gap-fill is in fact savings that we'll see on the expense side of this project. All of that needs to be to put together."

Apo said he didn't ask how much savings the city expected from lower bids. "My understanding is that they (city officials) have found a way to deal with the shortfall in revenue."

Apo said he's looking forward to the release of the final environmental impact statement in September. "That will include the full final financial report ... which will take all of this information and give us the final answers as to where things are in today's world."