Higher-than-expected material and labor costs for the new Whitefish City Hall and adjoining parking structure have forced the city of Whitefish into a cost-cutting scenario that still leaves the city nearly $227,687 short for the $14.95 million project.

The Whitefish City Council tonight will consider a four-part proposal that provides $772,322 through various budget maneuvers and design changes. The council also will make a decision on how to handle the remaining $227,687 shortfall.

The city recently demolished its aging City Hall to make way for the new facility that will include a parking structure with 212 spaces. Ground work is underway on the half-block site at the northeast corner of Second Street and Baker Avenue in downtown Whitefish.

Martel Construction of Bigfork is the general contractor and construction manager for the project.

City Manager Chuck Stearns said cost increases over the past few months are due largely to the rising cost of steel, concrete and labor.

“As construction has resumed heavily in the valley and the country, things are costing more,” Stearns said. “Contractors are having trouble hiring labor; labor costs are going up.”

The City Hall portion of the project is still in line with earlier cost projections, while the parking structure — which includes a sizable amount of steel — is where the higher costs are being realized.

Stearns said the design team for the project knew a specialized foundation system would be needed for the swampy, clay soil prevalent throughout the city, but the required rammed aggregate piers are more expensive that what had been budgeted.

“We anecdotally knew that we have bad soils, but until they did the drilling and soil testing” it was not fully known how much reinforcement the foundation would need, Stearns said. “As it turns out, we have kind of an expensive method.”

About 400 of the special piers, each 2.5 feet in diameter, will be drilled down 15 feet and packed with imported aggregate to create “superstructure” piers, he said. They will be installed throughout the half-block.

The cost-cutting proposal includes a number of building amenities that would be removed from the project at the recommendation of a subcommittee.

Those cutbacks include not finishing the basement storage area and lockers/restrooms, scrapping a skylight over the City Council chambers and eliminating some canopies from the retail space planned along Baker Avenue.

An elevator planned in the southwest portion of the facility would not be completed, although the shaft would be built for future installation. Oversized brick on the alley side of the building would be replaced with painted blocks and a detail design on the roof cornice would be scrapped.

Those reductions would save $229,128.

The city also proposes to add $162,000 in revenue to the project budget by capitalizing three years of lease payments from the forthcoming retail space in the facility. That amount would then be borrowed from the city’s tax-increment finance fund and repaid over three years as retail lease payments are made to the city.

More value engineering changes would save $181,194, and $200,000 in projected leftover ancillary costs would be allocated. That potential $200,000 is part of a $1 million ancillary set-aside included in the $14.95 million price tag.

To cover the remaining $227,687 shortfall, the money could come from additional value engineering or other design cost reductions. The council also could opt to increase the overall budget and further tap the tax-increment fund.

Another option is to use the 5 percent contingency set-aside, although “nobody wants to use that until we get out of the ground and get built,” Stearns said.

Private fundraising also may be an option, he added.

In his latest report to the council, Stearns noted that some community members feel the city should review its resort tax priority project list and pay for the sidewalk and streetscape costs with resort tax revenue.

“That concept has not had support of the elected officials on the subcommittee or city staff,” Stearns said.

Features editor Lynnette Hintze may be reached at 758-4421 or by email at lhintze@dailyinterlake.com.