The Honolulu rail project cleared a significant hurdle Thursday when the Federal Transit Administration said it could enter into “final design” — the last stage before a promise of $1.55 billion in federal funds and a green light for construction.

The approval came in a letter from FTA regional administrator Leslie Rogers and was announced in a press release from the city. It allows essentially everything but construction, explicitly including final design activities, demolition and procurement of rails and ties.

The release included celebratory quotes from a wide cast of characters — Mayor Peter Carlisle (“This is great news for Honolulu”); Sen. Daniel K. Inouye (“This is significant and demonstrates the continued support”); U.S. Reps. Mazie Hirono (“Today’s announcement is a significant milestone and another positive step”) and Colleen Hanabusa (“I’m glad to see the project continue to make progress”); Honolulu City Council Chair Ernie Martin (“I am pleased with the FTA’s announcement”); and Honolulu Authority for Rapid Transportation (HART) board Chair Carrie Okinaga (“This approval serves as further confirmation”).

But the news wasn’t entirely positive, and opponents have some new ammunition to use against the project. The letter said the FTA has rated the Honolulu project as “medium-high” and said the city has work to do before the FTA will agree to provide the federal funding via a Full Funding Grant Agreement (FFGA).

“Regarding the Financial Capacity Assessment, FTA notes that the financial plan HART submitted is sufficient to advance the project into final design,” the letter states. “However, it must be further strengthened before FTA will consider awarding an FFGA.”

Specifically, the FTA said the plan calls for extending the General Excise Tax surcharge if it needs more funds for rail construction, but that HART would need the state and/or city governments to take additional actions to allow such a move.

“Prior to the Project’s consideration for an FFGA, HART should demonstrate the availability of additional revenue sources that could be tapped should unexpected events such as cost increases of funding shortfalls occur,” the letter states.

FTA also asked for further justification for HART assumptions about bus and HandiVan operating costs; the impact to the city’s budget to operate the rail; and the diversion of federal bus money to the rail project.

The announcement from the city came a few hours after HART interim executive director Toru Hamayasu told the board he expected the approval “very shortly” and that HART will start pouring concrete in March if it’s able to secure a Letter of No Prejudice, which would permit the city to spend its own money on construction before receiving the federal funding commitment.

Also at that board meeting, opponents urged HART to slow down. They want the city to hold off on construction until after the federal lawsuit challenging whether the city and federal government followed environmental review laws. The opponents also said the city should wait for federal funding and a decision from the Land Use Commission on the the Hoopili development where three rail stations are slated to be built.

The letter marks a major step for the project. But the FTA has made clear that challenges remain.

Read the full FTA letter here:

Follow Civil Beat on Facebook and Twitter. You can also sign up for Civil Beat’s free daily newsletter.