Honolulu real estate prices are expected to fall over the next three years, but the estimated cost of acquiring land to build Honolulu's elevated commuter train is going up.

In late 2006, the city estimated it would need $70 million to purchase land for the rail project. Now the estimate is between $160 million to $170 million, according to budget documents recently filed with the City Council.

To be sure, $160 million to $170 million is a fraction of the overall estimated $5.4 billion cost of the project. However, the more than 128 percent rise in projected real estate costs highlights concerns raised by critics and others that the city's financial projections for the project are unrealistically low.

The increase in real estate costs "seems counter-intuitive," said Robert Thomas, managing attorney for the Pacific Legal Foundation's Hawaii Center, which lobbies for property owner rights. "That seems odd. If anything, property values are flat. That either says they grossly undervalued the properties before or that they're adding more things (to the budget)."

City Transportation Director Wayne Yoshioka said the project budgets that reflect the increased land costs contain rough estimates that are likely to change as the project progresses. Yoshioka said he did not know whether estimated land costs for the project had increased overall.

The rail project, which will be the the state's largest public works project, will affect O'ahu property owners in a variety of ways. Some, including those closest to the 21 planned train stations, could see property values increase.

Conversely, owners of property near the train tracks but far from the stations may face nuisance effects from increased noise and the unsightly elevated structures. That could lower their land values.

Another set of property owners will have no choice but to sell all or a portion of their land to make way for the elevated guideway and stations.

The city plans to build the elevated, approximately 26-foot-wide East Kapolei to Ala Moana guideway within existing street rights of way and on government-owned land. However, the guideway and its 50-foot-wide stations will still require acquiring all, or portions of 182 properties including 20 homes primarily in an area near the H-1/H-2 merge known as the Banana Patch.

Those train-related acquisitions are expected to start within the next year.

LAND PURCHASES

From the city's standpoint, the timing of real estate purchases could be favorable. That's because local real estate values are projected to decline this year through at least 2011, according to the University of Hawai'i Research Organization.

The city is planning to spend the first $30 million to $35 million on land acquisition and tenant relocation between July of this year through June of next year, according to budget plans. Those purchases will come in advance of construction of the project's first phase in December. The train would open in phases between 2013 and 2019.

That timetable is contingent on the city receiving federal approval of the project's environmental impact study.

"While we're doing a lot of prep, we can't actually go forward and consummate" land acquisitions, Yoshioka said. "We're not permitted to do any of that until you have the ROD, the record of decision."

Because mass transit serves a broad public purpose, there's likely little legal basis for preventing the city from acquiring property needed to build the train. The city said it will offer owners fair market value based on an appraisal. However, the timing of the purchases is in the city's hands. That has some property owners worried.

ALL ABOUT TIMING

Jim Frierson, who operates Island Pool & Spa on Kona Street, has known for at least three years the city may need to buy his property to build the rail. That has limited his ability to sell the property, which has an assessed valuation of about $5.7 million, he said.

"Anyone buying it would essentially be gambling on the train not being built," Frierson said. "It would be very hard to make the argument that the value of the property would go up in the future."

Meanwhile, Frierson said he fully expects property values to go down at least in the near-term future — a situation that favors the city.

"In theory, they can force you to sell at a substantially reduced value, and — in a worst-case scenario — they could force me to sell below my mortgage," he said. "If the market goes way down, I could actually find myself having to buy my way off my own property. It's very different than a voluntary sale of property because timing is everything in real estate."

At least one property owner is ready and willing to sell property to the city. Beverly Rodrigues owns a single-family home on Dillingham Boulevard that's slated to be purchased to make room for a train station. She said she expects the city to offer a fair price for the home.

"I'm not concerned about it," said Rodrigues, who lives in Pacific Heights. "I'm really for this rail system. If they're going to take my property, or our property, I have no qualms with that."

The Pacific Legal Foundation's Thomas, said property owners can expect the city to drive a hard bargain when it comes time to buy needed lands.

"Historically, government offers are low," he said. "My guess is there's not going to be any difference now.

"The city's position is that they are protecting the taxpayers' wallet. They're not in the business of saying let's give you a little extra because of what we're doing to you."