Tax revenue needed to build the city’s $5.5 billion rail fell sharply in May versus the same month last year.

The total net transit tax collected last month was $8.3 million, compared with $14.9 million in May 2009, based on figures provided by the state Department of Taxation. That is the lowest monthly amount of transit tax collected since February 2007, when just $2.2 million was collected during the second month after the surcharge was enacted.

May’s transit tax receipts also are below a target monthly average of $14.5 million.

Overall, the city is still collecting most of what is needed to build the 20-mile, East Kapolei-to-Ala Moana elevated rail. Between April 1, 2009, and March 31, the tax raised $161.3 million. That is in line with the city’s forecast of $164 million for that period.

"We are now 99.6 percent of what we wanted to collect for rail," said Mayor Mufi Hannemann during a news conference Monday. "It’s in the coffers already of the city so we … basically have the moneys good to go."

City spokesman Bill Brennan said yesterday that for transit tax accounting purposes the city’s fiscal 2010 year ends in March. Based on the city’s accounting technique, transit tax collections in the first two months of the current fiscal 2011 (April and May) were $18.1 million, which was down from $26.9 million in those months last year.

The tax collections are tracking below the pace needed to meet the city’s 2011 forecast of $174 million, or $14.5 million a month.

City officials have downplayed the decline in transit taxes, saying it will be covered by lower-than-anticipated project costs and a $1.3 billion set-aside in the financial plan for contingencies.

A half-percentage-point, 15-year surcharge was added to the general excise tax in Honolulu in January 2007 to pay for rail. All transit tax collection figures in this story exclude a 10 percent administrative fee retained by the state, which collects the taxes.

The city expects transit tax revenues to raise an inflation-adjusted $3.69 billion through 2022 when the surcharge expires, according to an August city financial plan. That is down from the $4.05 billion in transit tax revenues forecast by the city in 2008.

So far the transit tax has generated a net $517 million for the city.

Local bank executive Don Horner said transit tax collections have likely hit a low point and now have great upside potential. Horner is on the executive committee of the Hawaii Business Roundtable, which analyzed rail finances in 2008.