The Honolulu City Council Budget Committee gave preliminary approval Wednesday to a bill that would extend Oahu’s 0.5 percent surcharge on the general excise tax through 2027 to help pay for the $6.57 billion rail project.

But final passage of the five-year extension, a move that rail officials view as critical to the future of the project, is not assured.

After the meeting, Council Chairman Ernie Martin said anything is possible. “There were a lot of questions today and there are still a lot of questions to be asked,” he said, regarding rail costs.

Extending the surcharge by five years is projected to yield $1.2 billion to $1.8 billion, assuming a growth rate of 3 to 5 percent. The version of Bill 23 approved Wednesday caps the amount that would be available to rail construction at $910 million, although Council members disagree about whether such a restriction is a good idea.

The vote was 4-1, with Budget Committee Chairwoman Ann Kobayashi casting the lone vote opposing the bill. Councilwoman Carol Fukunaga voted yes “with reservations.”

The measure is scheduled for the Council’s Dec. 9 meeting, where all nine Council members will consider giving it the second of three needed approvals, and the public will be given a chance to comment. If approved there, it would return to the Budget Committee for another go-around and, if successful, go back to the Council for a final vote.

That final vote could take place in January, but Martin and Kobayashi said the Council is considering requests to hold public hearings on the North Shore and in Windward Oahu. Night hearings have already been held in Kapolei and Honolulu.

Honolulu Authority for Rapid Transportation officials say that without the extension, the 20-mile, 21-station line from East Kapolei to Ala Moana Center cannot be completed. Critics say the project is driving the city broke and they want the Council to reject the extension and either scale back or halt the project.

Therese McMillan, acting administrator for the Federal Transit Administration, last week told Mayor Kirk Caldwell that her agency is withholding $250 million in federal funds for the project until it received assurances that there would be money available to finish the project.

The $250 million is part of $1.55 billion that the FTA promised to the city under a federal full funding grant agreement.

With projected costs climbing to $6.57 billion from the $5.26 billion figure used by HART officials last spring, Council members said they want to consider options such as reducing the length and scope of the project and even cutting the FTA agreement altogether to free the city from the agreement’s restrictions.

During a committee meeting that ran nearly five hours, Council members criticized the Caldwell administration, HART and even the FTA.

Martin grilled city Transit Services Director Michael Formby over the administration’s decision to first disclose McMillan’s threat via a news release and not directly to Council members.

“The Council is a partner in this effort,” he said. “Why place the City Council in an adversarial role?”

Formby said he did not believe Caldwell was consulted before the release was issued.

Councilman Trevor Ozawa said he was baffled that the FTA would warn only Caldwell about the potential for a contract breach when the grant agreement was signed by Caldwell, Martin and HART Executive Director Dan Grabauskas.

“It would seem to me that … they would be breaking the agreement that we signed by stating that they’re not going to execute on their end of the bargain when all they had was a conversation with our mayor, one of three parties to that document,” he said.

Ozawa and several of his colleagues said a letter sent by McMillan to Caldwell last week was vague about what she wanted from the Council and they urged transit leaders to press the FTA for more exact language about what could be deemed a breach or an allowable change.

But Councilman Ikaika Anderson said he went to Washington to meet with McMillan and, like Caldwell, was told, “It is a contract and you must honor it.’”

Anderson continued, “We cannot shorten the length of the project, we cannot delay or cancel any of the 21 stations that we’ve committed to delivering. … ”

He estimated that stopping the project, as some critics have suggested, would cost taxpayers $1.85 billion in debt, including the money to dismantle what’s been built.

HART Chairman Don Horner said capping the available proceeds to HART at $910 million would not leave enough for the agency to pay for debt service or a required cash balance.

Committee members also told HART officials about news reports that the cost of relocating utility lines had not been fully factored into current cost projections. Grabauskas said the agency has allocated $120 million for utility relocation, including $90 million for HECO lines.

Also Wednesday, the Budget Committee — and then the Council in a special meeting — voted to give final approval to Bill 73, authorizing the city to issue up to $450 million in general obligation commercial paper, or short-term bonds. Of that amount, $350 million would go to the rail project, while $100 million could be used for general capital improvement initiatives.

Administration officials urged Council members to expedite the approval to lift a legal cloud and ensure the rail project does not incur an estimated $3 million a month in late payments and debt due to a lack of cash flow.

The new bill is needed because the original authorization for the commercial paper was one of a number of bills called into question in a lawsuit filed in September by Campbell Estate heiress Abigail Kawananakoa.

Because of the lawsuit, Corporation Counsel Donna Leong will not sign off on a memorandum, required by bond underwriters, showing no pending litigation involving the previous authorization.