Honolulu's mass-transit project hit a bump in the road yesterday after the City Council rejected a last-minute request from the city administration that would have given the state $5 million to guarantee the transit tax surcharge will be collected starting in January.

The city is counting on the increase in the general excise tax — from 4 percent to 4.5 percent — to provide $150 million a year for a mass-transit system for O'ahu.

City planners are analyzing costs, ridership and different technologies and routes, preparing to report to the council by Nov. 1. The state Legislature passed a bill to allow the county to levy the tax surcharge to pay for a transit system, with the increase set to begin in January 2007. Gov. Linda Lingle allowed the bill to become law without her signature, signaling her reluctance to have anything to do with a tax increase.

But city deputy managing director Trudi Saito said the state's tax director has since told her that the city should provide a guarantee or risk the state not having a vendor in place to begin collecting the tax in January. She said that putting up the $5 million to guarantee the collection of $150 million seemed worthwhile.

But councilman and former state lawmaker Romy Cachola wondered how the state could avoid collecting the tax since the state law requires it. Saito assured the council that the city has made that argument but continued to meet state resistance.

TOO MUCH TIME PASSES

Mayor Mufi Hannemann and seven of the nine City Council members have supported the tax increase, saying that a mass-transit system is needed to deal with increasing gridlock on O'ahu.

The plan was to set aside $5 million from a rainy-day reserve fund to guarantee that the state tax collection would begin.

Hannemann representatives said they waited to tell council members about the proposal because they had been trying to convince state officials that it is a state responsibility to begin collecting the tax as required by the bill that was passed.

That bill sets aside 10 percent of what is collected from the tax to pay for the state's administrative expenses.

But waiting so long to tell the council apparently backfired, with some council members questioning whether the city has tried every option with the state. Other council members cried foul over who was told when.

Saito said she and deputy corporation counsel Donna Woo were briefing council members the night before yesterday's council meeting but didn't get to everyone.

But the council members who weren't told anything by the city administration were the two who had voted against the excise tax increase: Charles Djou and Barbara Marshall.

"You were playing politics. I'm more than a little (upset) about the conduct of the administration," Djou said on the council floor.

Hannemann said he would keep trying to keep the important project on track.

"Do I think this is a serious setback? No, I don't," the mayor said. "We need the state to collect the tax."

'DOWN PAYMENT'

Transit supporters did get some good news yesterday from U.S. Rep. Neil Abercrombie, who said that Honolulu mass transit received a commitment for the first installment of federal aid Tuesday night when the House Appropriations Committee approved funding for the project.

Abercrombie said the transit appropriations bill includes $250,000 for Honolulu transit, which he requested. He called it "a major breakthrough."

He said, "it's the first installment on the federal cost share for this badly needed project." Of more than 300 projects included in last year's federal authorization bill, Honolulu is one of only 10 to receive first-time funding approval in this appropriations bill, he said.

Abercrombie called it a "down payment" that means more federal funding will come.

The federal bill also included $500,000 for repairs on Kapi'olani Boulevard, $400,000 for road improvements on Maui and $15 million for ferry systems in Alaska and Hawai'i, Abercrombie said.

Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com.