But the state agency had to consider an earful of impassioned testimony from small-business owners who objected to the project and its costs that they must share because they are in a state-designated improvement district.

"Why are you trying to run us out of business?" Neal Tamura, owner of the second-generation family auto shop Ray's Transmission, asked agency board members. "I will not support a project that will run us out of business."

The project 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.

But this project, the third of four sections of Queen to be transformed into an envisioned major artery through Kaka'ako, has been the most contentious because it is the first improvement district where the majority of landowners being assessed for the upgrade are small businesses.

In all, 25 property owners would be assessed, most of them small businesses including auto repair shops, furniture stores, wholesalers, a firearms dealer and pest control firm. Bigger landowners include Victoria Ward Ltd., CS Wo & Sons, and Central Pacific Bank.

Because most assessees are small businesses, the agency reduced the cost for smaller land-owners, who still were not happy with the plan.

The project will widen the road from two lanes to four, and provide metered parallel parking. Sidewalks, curbs and storm drains — none of which exist — will be added. There will also be upgrades to sewer and water lines. Utility lines will be buried.

The state would pay for 69 percent of the project, or $10.7 million. Utility companies would pay 12 percent, or $1.9 million. Area landowners would pay 19 percent, or $2.9 million.

The landowners' share of the cost was reduced from $4.5 million, with the savings going to owners of less than 80,000 square feet of property.

Victoria Ward, whose assessment was unchanged at $1.7 million, was the only landowner represented at yesterday's meeting that supported the project.

Several smaller business owners complained about the loss of parking, the expense burden and a lack of direct benefits to their business. They also said the assessment is unfair because they've been paying property taxes for decades without benefit of infrastructure upgrades.

Dexter Okada of wholesaler U. Okada & Co., a 50-year Kaka'ako business, said his assessment will be $250,000. "It's going to hurt us," he said.

Businesses with about 5,000 square feet of land, such as Ray's Transmission, would have to pay about $60,000. The assessment on a 40,000-square-foot property is roughly $167,000.

"The assessments are not fair," said Cliff Garcia of Tropical Lamp and Shade Co. He said he pays sewer and water fees that are supposed to pay for upgrades. "I don't think it's right since we pay the city and county for that. This whole thing's not right."

Agency members said the improvements would make the area more attractive for customer traffic and would also encourage redevelopment in the area.

The agency is offering to finance assessments over 20 years with moderate interest and said it would consider buying property from affected landowners.

Several board members said approving the project was a difficult decision, but the vote to move ahead was near unanimous, with member Paul Kimura the only no vote as he felt small- business owners were losing out.

The project still needs the approval of Gov. Linda Lingle, who will receive input from the state Small Business Regulatory Review Board. Construction is expected to start in March and take about 18 months to complete.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.