HONOLULU -- City officials on Thursday said a federal study found that Honolulu's rail transit project has a realistic and price tag.

The federal government is giving the city $1.2 billion for rail transit, so it hired a third-party firm from Texas to analyze the city's rail plan.

The consultant found the city's rail transit project is ready to enter the preliminary engineering phase.

"Another very strong indication that we are on track, we are on schedule to break ground for this project late this year," Mayor Mufi Hannemann said.

The consultants found rail transit will probably cost a little more than $100 million higher than the city's current estimate. The city predicted $5.17 billion. The report recommends the total cost will be closer to $5.29 billion because of inflation.

That is still significantly less than the city's previous estimate of $5.43 billion in its draft environmental impact statement.

"There's no way this project is way over budget. No way," Hannemann said.

"This thing has been scrutinized several times over and when the federal government can come in and say we have a good financial plan. I mean, what better reassurance can you have?" Councilman Gary Okino said.

Hannemann said $1.2 billion of rail's cost, nearly 23 percent, is set aside for unforeseen contingencies.

"So, we have built in there a very smart, a very businesslike approach to account for change orders, cost overruns, or cyclical nature of the economy," Hannemann said.

The study also predicts the project will take five months longer than the city estimates finishing in August 2019, instead of March that year, which supporters said is not much in the life of a 10-year project.

"It just verifies everything that we've been saying," Okino said.

The report was required as part of the oversight from the federal government, before it gives Honolulu any money for rail transit. The city expects to receive more than $1 billion in federal funds from the Federal Transit Administration in the spring of 2011.