Financing projections for the city's estimated $3.6 billion transit project haven't adequately considered the possibility of an economic downturn that could cut revenue during construction, several City Council members suggested yesterday.

"What happens if we don't get all the federal funds or the economy doesn't grow?" Councilman Charles Djou asked Toru Hamayasu, the city's chief transportation engineer, during the first public hearing on the proposed mass transit project.

Hamayasu said the city has confidence in its numbers, which show that construction of a proposed 20-mile transit system can be financed entirely by existing taxes and federal funds.

"We can have everything paid for by the year 2022, even if we have to borrow some funds along the way," he said.

That is the year that the half-percentage-point increase in the general excise tax to help pay for the system is scheduled to expire. The surcharge begins on Jan. 1, 2007.

If the council opts for a more expensive 28-mile version of the rail plan running all the way from Kapolei to Manoa, however, the city will need to seek additional sources of funding, including the development of public-private partnerships.

On Jan. 1, officials are scheduled to begin collecting the new general excise, which could generate up to $150 million a year for transit. The official "alternatives analysis" plan presented to the council yesterday gives the following likely cash flow for that and other construction-related funds during the next 16 years:

Since construction would not begin until 2009 at the earliest, money collected between now and then would be deposited in a savings account and start earning interest. All of that money, however, would be drawn down and used for construction between 2009 and 2011.

From 2011 to 2016, the city would have to borrow an estimated $1.3 billion to help complete the construction. The loan principal and interest would then be repaid from 2017 to 2022, with funds generated by the general excise tax increase.

However, the available tax and federal funds would not be enough to cover the longer 28-mile rail project estimated at $4.6 billion. If the council chooses that option, officials would have to come up with between $717 million and $1.2 billion in other sources of revenue, the report says.

Those funding sources, according to the city's analysis, could include more local taxes, and private real-estate related sources, including public-private partnerships or new fees for developers.

The alternatives analysis presented to the council yesterday also concludes that the managed lane option supported by some people would not be eligible for revenue generated by the new general excise tax increase. Instead, all the estimated $2.5 billion in construction costs would have to come from toll revenues and unspecified other sources.

Hamayasu tried to assure council members that the city used a range of "reasonable" financial projections in coming up with its economic forecasts.

The city's detailed alternative analysis report for a high-capacity transit project released on Monday includes projections that show construction costs for the shortened East Kapolei-to-Ala Moana project, including land and equipment acquisition, would be about $3.6 billion, or $4.5 billion when adjusted for inflation by the end of the financing period in 2022.

Hamayasu said the city relied on economic projections from the state's Council on Revenues to come up with estimates showing how the costs could be covered. Using the more conservative of the council's figures, city officials concluded that a new half-percent increase in the general excise tax dedicated to transit projects would likely raise just over $3 billion in today's dollars.

The city also expects to receive more than $800 million in federal transit project start-up funds, more than enough to cover the construction costs, including an estimated $200 million in loan interest that would be incurred during the construction phase of the project, Hamayasu said.

Including the interest, the construction cost of the 20-mile project rises to $3.8 billion, Hamayasu said.

"As far as other sources, it would be zero, zero, zero, zero," Hamayasu said, pointing to places in a table that show no need for additional funding.

Reach Mike Leidemann at mleidemann@honoluluadvertiser.com.