City Managing Director Douglas Chin Wednesday apologized for failing to notify the City Council he had suspended debt guidelines for the multibillion-dollar rail project, as the city administration came under fire for lack of transparency.

Members of the Honolulu City Council said Mayor Peter Carlisle’s administration should have disclosed that Chin signed a letter on Oct. 26 suspending long-standing debt guidelines that had been adopted by the Council.

The letter was required to clear the way for borrowing hundreds of millions of dollars to help finance the city’s $5.27 billion rail transit project.

Council Chairman Ernie Martin said he was inclined to give the administration the benefit of the doubt, "but this kind of decision, and then to have to read about some of the statements being made by the mayor, it leads me to believe that from this point going forward, it’s hard for this Council to give any credibility to anything the administration represents."

Carlisle said last week that Martin was provided with information on the suspension of the debt guidelines in budget presentations last March.

However, Chin acknowledged during questioning Wednesday the Council was never told that the city was moving forward to immediately suspend the debt guidelines, and the Council was not given detailed information about the decision.

Chin’s action to suspend the city debt guidelines came to light last week in a consultant’s report on the rail project that was prepared for the Federal Transit Administration. The report was obtained by the Star-Advertiser under a Freedom of Information Act request.

Chin said the letter suspending the debt guidelines was essentially acknowledging and memorializing decisions on rail financing that had been made in the preceding four years.

The city will borrow hundreds of millions of dollars beginning in 2013 to maintain the cash flow needed to pay contractors while the rail system is under construction.

Borrowing will peak in 2017 and 2018, when outstanding debt for rail will total more than $1 billion at the end of both years, according to the report by federal consultant Porter & Associates Inc.

The debt guidelines were established by the City Council in 1996 and updated in 2006, and are supposed to limit the amount of money the city spends each year to repay general obligation bond debt.

The guidelines say the money spent on debt service should amount to no more than 20 percent of the city’s total annual operating budget, and no more than 20 percent of the amount the city general fund receives from property taxes and other sources.

The Council resolution that established those guidelines states the guidelines "may be suspended for emergency purposes or because of unusual circumstances."

Chin said suspending the debt guidelines will not affect the city’s credit rating. He also reminded the Council that the money the city borrows for rail will be repaid from the special half-percent excise tax surcharge and federal funds, not from city general funds.

That means rail debt is unlike ordinary city debt for other kinds of projects, and therefore should not be subject to the debt guidelines, Chin said.

Chin has said there was no legal requirement that the administration notify the Council that the debt policy was suspended, and the administration never wrote to Council members to tell them.

Martin made it clear he believes the Council should have been formally notified.

"For an administration that touts itself on being transparent, something as critical as this I would have thought would be of such significance that when your memo was issued and then approved, that the Council would at least have gotten a courtesy notification," Martin said.

Under questioning from Council members, Chin said he did not even tell Carlisle that Chin had signed the letter suspending the Council’s debt guidelines at the time he did it. That drew a surprised response from Councilman Romy Cachola.

"It’s quite surprising," Cachola said. "We’re talking in terms of billions, and you don’t even let the mayor know about this? It’s unheard of. He should be in the loop."