The projected $3.5 billion deficit for the city’s troubled rail project is far less than feared — $1.97 billion, rail officials said Wednesday.

And the projected overall cost, including financing charges, also has fallen, from $12.5 billion in March to $11.48 billion, Lori Kahikina, interim CEO and executive director of the Honolulu Authority for Rapid Transportation, told the City Council Budget Committee.

HART has let go employees and contractors, and continues to search for cost savings since Kahikina took over this year, followed by her previous cost and deficit projections in March.

Earlier Wednesday, HART Chairwoman Colleen Hana­busa told the Honolulu Star-Advertiser’s “Spotlight Hawaii” livestream program that the size of the deficit projected in March was based on “conservative” estimates of costs and revenue, and could turn out to be $2 billion and perhaps even as low as $1.5 billion.

Rail revenue from general excise and transient accommodations taxes took a hit when COVID-19 began strangling the state’s tourism- based economy in 2020, and previous price tags and deficits were based on “aggressive” estimates, Kahikina has previously said.

But both the general excise and state TAT have recovered faster than expected, and an outside HART consultant, Triunity, is now forecasting better numbers for rail, Kahikina told the Budget Committee.

HART officials are hoping the project will receive a share from a new county transient accommodations tax currently being considered by the Honolulu City Council.

The Budget Committee on Wednesday voted to allot a third of the 3% tax to rail for the first two years and then increase the share to 1.5% in perpetuity.

Before the committee vote, Hanabusa told “Spotlight Hawaii” that the size of the deficit might even be reduced further by potentially $500 million. “It’s all based on assumptions, snapshots in time and what we basically believe the amount of income will be that’s coming in,” she said.

HART plans to finish building a rail system comprising 20 trains along a 20.2-mile, 21-station route from East Kapolei to the interior of Ala Moana Center, Hawaii’s largest transit hub.

Hanabusa said there is enough money to get through Middle Street in Kalihi but the challenge remains of funding construction for the final 4 miles to Ala Moana.

She also said Kahikina is in talks with the HART board to become the permanent CEO and executive director. Her predecessor, Andrew Robbins, was the city’s highest-paid employee.

Hanabusa, a former congresswoman and gubernatorial candidate, said she will not run for lieutenant governor next year but did not rule out another bid for governor.

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Staff writer Ashley Mizuo contributed to this report