An impasse between the Honolulu City Council and Mayor Kirk Caldwell over how to plug an estimated $44 million shortfall in the city rail project’s recovery plan apparently has been resolved.

City Council Budget Chairman Trevor Ozawa announced Friday he is proposing that the $44 million become part of the Honolulu Authority for Rapid Transportation’s capital improvements project budget instead of in the city’s general capital improvements budget.

If the money is borrowed, the principal and interest would need to be paid back through the city’s operating budget, which is funded primarily through property taxes, because they would be general obligation bonds. That also would have been the case under the original plan in Caldwell’s budget package.

But HART officials repeatedly have said that the version of the recovery plan the Federal Transit Administration was using for its calculations was outdated and that its more recent forecasts for general excise tax surcharge revenue show there won’t be a need to borrow the money.

After his original proposal was panned by Council members, Caldwell warned that officials with the FTA wanted certainty about how that possible budget hole would be covered. The FTA committed to paying $1.55 billion of the $8 billion-plus project, but has withheld about half the money until the city can provide assurances — through a recovery plan — it would be able to manage any new shortfalls.

HART’s proposed recovery plan has been pending before FTA officials since September. Since then Caldwell and Council members have met with FTA representatives in Washington, D.C., to discuss the issue.

Most of the criticism from Council members involved the notion that the city would be borrowing money to pay for administrative costs associated with the project’s construction. Ozawa, Council Chairman Ernie Martin and other Council members have been proposing cuts to the city’s 2019 operating budget to come up with the $44 million.

On Friday, however, Ozawa said that placing the $44 million in the HART capital budget was the right thing to do, especially since HART officials have assured him the borrowing won’t be needed based on current GET surcharge revenue forecasts. The bulk of the city’s share is coming from the surcharge.

“This approach was chosen after careful consideration of several alternatives,” Ozawa said. Caldwell’s plan allocated the funding but “did not provide a mechanism for HART to access the funds.”

Further, Ozawa’s plan assures any bond money for rail would not be commingled with funds borrowed to fund a host of other city projects. “There will be greater transparency,” he said.

Caldwell and Andrew Robbins, HART’s executive director and chief executive officer, both issued statements supporting Ozawa’s plan.

Robbins reiterated that HART doesn’t foresee a need for the $44 million. “We believe the Council leadership has put forth a proposal that will address the concerns of the FTA,” he said.

HART spokesman Bill Brennan said the rail authority’s board will need to approve the addition in its capital improvements project budget, and likely will do so at its meeting in June, shortly after the Council is expected to approve budget bills on June 6.

“As long as the (FTA) accepts placement of this funding in HART’s capital budget, as opposed to the city’s capital budget, I support the City Council’s decision,” Caldwell said in a separate news release. “We all have the same goal, to get rail back on track, with stronger oversight and management.”

The issue is expected to be discussed at a Council Budget Committee meeting on Tuesday.

The $44 million actually is part of a projected $214 million shortfall in project costs. The city will need to come up with that funding, but officials are hoping the intake of excise tax surcharge dollars will be able to meet the rest of it.