Most of the 25 area business owners opposed the upgrade because they will lose parking spaces for customers and employees and must pay 19 percent of the project's cost.

The business owners met with Lingle last month, and several came away thinking she would delay the project. The state's Small Business Regulatory Review Board had urged Lingle to consider the "tremendous" damage the project would do to area shops.

"Every business here is against it," said Cliff Garcia of Tropical Lamp & Shade Co., 977 Queen St. "Without parking, we can't exist. But (Lingle) doesn't seem to care. I was expecting her to say (the state) will have to hold off on this and research it," added Garcia, whose share of the project's cost will be $90,000. "She didn't listen to the small businesses at all."

The state agency in charge of Kaka'ako's redevelopment, the Hawaii Community Development Authority, pushed ahead with the upgrades, saying it would make the area more attractive and promote customer traffic.

Victoria Ward, the largest single landowner fronting the affected area, supports the project even though its share of the cost will be $1.7 million.

In all, area businesses will pay $2.9 million. The state will pay 69 percent, or $10.7 million, and utility companies will pay 12 percent, or $1.9 million.

A start date for the project has not been determined. But once construction begins, the project will last approximately 18 months, Dinell said.

The Small Business Regulatory Review Board recommended to the governor that she scrutinize the project's negative financial impact on area businesses. The project would "eliminate long-term tax-paying members of O'ahu's business community for over 60 years," the board's report said.

Lynne Wood, chairwoman of the state's Small Business Regulatory Review Board, declined to comment yesterday on the governor's decision. "I don't feel comfortable commenting," Wood said.

The governor also declined to comment on the decision, according to Russell Pang, Lingle's spokesman.

HCDA's Dinell said his agency has tried to reduce the financial burden on small-business owners by capping the amount they have to pay at 19 percent for improvements while offering 20-year loans at low interest rates.

This week, the Board of Water Supply also agreed to contribute $350,000 to help ease the costs for small-business owners.

Temporary parking sites for employees and customers have already been identified during the construction phase. The agency hopes to secure a site for a permanent parking garage for employees — most likely at Kawaiaha'o and Cummins streets — at a negotiated monthly rate.

The businesses along Queen Street will remain accessible during construction, Dinell added.

Neal Tamura, owner of the second-generation family auto shop Ray's Transmission, said he will lose most of his customer parking to the upgrades. On top of that, he'll have to pay $65,000, and he doesn't want to take out another loan.

"It's terrible, because they're not listening to the people," said Tamura, whose shop has been at 959 Queen St. since 1986. "My feeling is (Lingle) considers herself pro-business, but it doesn't seem so in this case. I mean, all the public hearings we went to, all the testifying, all for nothing. The end result is still yet the same. It's a flawed plan, and they know it. They just won't recognize it."