Honolulu rail’s federal partners believe it will cost $700 million to $1.2 billion more than local rail officials’ most recent estimates to complete Oahu’s elevated transit system — a revelation that throws the future scope and design of the largest public works project in state history into question.

The added cost range, which the Federal Transit Administration delivered to local rail officials last week, is an early estimate that still has to be sorted out with the Honolulu Authority for Rapid Transportation, according to two of the rail agency’s board members — Colleen Hanabusa and Mike Formby.

If the federal numbers hold up, they would drive rail’s official cost as high as $8.1 billion to complete the entire 20-mile, 21-station project to Ala Moana Center.

That expense would far exceed the $6.8 billion or so in total funding that rail officials believe the project will receive. Last year, HART leaders, including the agency’s executive director, Dan Grabauskas, told state lawmakers and the City Council that they believed a five-year rail tax extension would likely generate enough cash to get the project done.

Now, with rail’s final price tag still unknown, the steep cost estimates delivered by top FTA officials during meetings with local rail staff on Oahu last week have already altered the course of the project — although it’s not yet clear how. HART leaders expect that Honolulu’s residents, its mayor, City Council members and other stakeholders including the federal government will have to consider significant changes to the project to help rein in costs.

Such options, Formby and Hanabusa said, could include eliminating some of the 21 stations, shortening the line or reducing rail’s 80 total train cars.

“I speak for everyone when I say all options have got to be explored,” Hanabusa, a former Hawaii congresswoman, said Friday. “We have to move forward, and we have to have all alternatives on the table.”

Rail’s FTA partners previously indicated that such drastic cost-saving measures would violate their funding agreement, causing the project to forfeit a total $1.55 billion and putting it in a deeper financial hole.

However, with the rail project facing soaring construction and labor costs and major utility-line clearance problems, FTA officials have now told local rail officials that they’re willing to be more flexible to help get the transit system done “within our financial capacity,” Formby said.

“The FTA has said, ‘Think outside the box and we’ll talk,’” he said.

City Council Chairman Ernie Martin and some rail critics, including former Gov. Ben Cayetano, have predicted that the FTA would eventually consider changes despite the agency’s written warnings to the city not to alter the project’s scope. Last month, Martin said he “cannot believe” the FTA would not be willing to work toward a “realistic financial plan” to get rail done.

Stopping the line at Middle Street, as some project critics including Cayetano have suggested to help curb the skyrocketing costs, should be the “absolute last resort,” said Formby, the city’s Department of Transportation Services director.

“I think it would be less-than-functional to stop short of the primary urban core. I really do,” Formby said of the Middle Street proposal Friday. The move could significantly reduce ridership and drive up costs to the public to support rail operations, he said.

Rail officials have forecast an average of 116,000 daily trips along the 20-mile line by 2030, although a recent city audit warned that the system’s actual trips could be far fewer based on other U.S. cities that opened rail systems in the past 20 years.

Formby further floated the idea of potentially ending rail’s elevated guideway at Middle Street and then switching to an at-grade light-rail system into town, but he emphasized it was too early to say whether such an idea would work. Any changes to the transit system would involve lengthy public input and studies of how it would affect the project, he said.

Hanabusa said rail leaders would also have to work with HART staff to see how any proposed changes might affect existing contracts. The city has yet to award two major contracts to build rail’s second half and 12 stations heading into town. HART procurement staff is reviewing confidential bid proposals from three groups looking to build the next 5 miles of elevated guideway and four stations around the airport.

The city already has a $1.4 billion contract with rail operator Ansaldo Honolulu JV to create and run the city’s elevated rail system, and it’s not clear how changes would affect that work, which is well underway. The Hitachi-owned firm already delivered rail’s first four-car train this spring, and rail officials touted its arrival during a ceremony this month.

FTA officials delivered their assessment during meetings last week on Oahu with local rail staff, the board members said.

On Thursday, Hanabusa provided the Honolulu Star-Advertiser with a cost estimate that HART prepared in March and marked confidential. It put the agency’s latest price tag for rail at $6.9 billion. Hanabusa added on Thursday that the federal estimate was “significantly” higher.

She then joined Formby on Friday to disclose the federal range of added costs above what HART had estimated after the Star-Advertiser pressed city and rail officials for more details.

Formby and Hanabusa said they haven’t yet reviewed the federal cost estimates in detail, although HART staff will analyze them in the coming weeks. Rail officials will then release their updated cost estimate in more detail, based on HART’s discussions with the FTA, later this summer, they said.

Some of the cost differences involve what the FTA considers to be an acceptable contingency fund amount, Hanabusa said. HART’s March estimates include an 8 percent contingency, Grabauskas said Thursday. However, the FTA might require contingency of more than 13 percent, the board members said Friday.

Other cost differences have to do with rail’s utility-line clearance problems, they added. Jacobs Engineering, the FTA’s independent firm overseeing the project, has dubbed that issue rail’s most significant stumbling block.

“They were saying that we were underestimating the cost of the undergrounding (putting electrical lines underground), the difficulty in that,” Hanabusa said.

The difference between the HART and federal estimates is “probably comprised of many increases at different line-item levels,” Formby added.

The two board members did not rule out seeking more funding at the state Legislature. However, Hanabusa, a former state Senate president, downplayed that option Thursday. Her former colleagues at the state Capitol have already told her HART should not request another tax extension, Hanabusa said.

“The people have also got to weigh in,” she said of the potential changes to come. “We’re going to have to go out to the people, and that’s going to be a major component of it, too.”

“As bad as this sounds, to us it’s good news because now we’re being open and transparent about the potential cost of this project. And that’s a change … in the way the HART board approaches this project,” Formby said Friday. With new flexibility from the FTA, “we can get our hands around this problem and find a solution that we can live with.”