It’s now painfully clear, even to Mayor Kirk Caldwell, that the likely cost of taking rail all the way to Ala Moana Center would greatly exceed available funds.

That’s why the new plan is to stop at Middle Street, eight stops short of Ala Moana, at least until an additional $4 billion can be found.

Just weeks earlier, Caldwell and others were saying that it would make no sense to stop at Middle Street — rail needed to reach Ala Moana, at a minimum, or so they were saying before realizing that money simply wasn’t there.

Because of the decision to stop at Middle Street, the Federal Transit Administration could legally require the city to return nearly $0.5 billion already provided.

However, we believe the FTA will be extraordinarily flexible with this financial train wreck, partly because the FTA’s own hands are dirty. It knew very early on that city officials were neither competent nor honest.

We base this on interagency email in which FTA officials commented on the city’s “lousy practices of public manipulation,” willingness to “deceive with no remorse,” use of “inaccurate statements,” and having a culture of “never enough time to do it right, but lots of time to do it over.”

FTA officials also noted that the city had botched three projects and were “well on their way to a fourth,” started construction this time “without authority despite warnings that it would create an ineligibility for the project,” and put itself in a “pickle” by setting unrealistic start dates for construction.

We also know that FTA officials had the IMG report of independent experts hired by Gov. Linda Lingle to provide a second opinion on the likely cost of the proposed rail system.

The group’s bottom-line assessment should have alarmed the FTA: “A multibillion-dollar transportation improvement project, particularly one that is proposed to be operated in, and funded by, an urbanized area that is far smaller than the norm for such projects, should have its financial plan developed with methodologies that incorporate the highest professional and technical standards and techniques. As we demonstrate [in this report], the financial planning and modeling process for [this] Project fails this ‘best practices’ test in many ways.”

The FTA also aided the city in its dishonest efforts to convince people that rail would reduce the current level of traffic congestion.

For example, the FTA publicly expressed belief that “this project will bring much-needed relief from the suffocating congestion on the H-1 Freeway.”

This was contrary to the FTA-approved final environmental impact statement in which the city had acknowledged that “traffic congestion will be worse in the future with rail than what it is today without rail.”

Despite these and many other indications that the city could never build rail “on time and on budget,” as Caldwell repeatedly promised, the FTA apparently buckled under political pressure when it entered into the Full Funding Grant Agreement.

Because of the FTA’s complicity in Honolulu’s rail fiasco, the FTA should now allow the city to use the $1.55 billion of federal money to make the best of a terrible situation that it could and should have prevented.

We believe the most attractive of the available options is to convert the existing rail guideway into dedicated lanes for a Bus Rapid Transit (BRT) system that extends not just to Middle Street but far beyond to Manoa, Waikiki and other parts of the island, including Waianae. This could be done with the money that otherwise would be wasted on a rail system that was out-of-date before construction even began.

A BRT conversion would use familiar technology, have a higher ridership, preserve bus routes and provide more relief from traffic congestion than rail.