The Whitefish City Council once again is being asked to approve additional money for the City Hall and parking structure, this time to cover the costs of removing contaminated soil from the building site.

Facing a cost overrun of more than $1 million earlier this year, the council in January approved a new budget of $16,041,641 for the project that initially was expected to cost $14.95 million.

Shortly after that contaminated soil was found at the construction site on the northeast corner of Second Street and Baker Avenue. Now it’s time to figure out how to cover the $159,502 it cost to excavate, test and dispose of the soil.

A vapor-barrier liner and a vapor and groundwater extraction system also were added as recommended by the city’s water consultant.

The unexpected costs from the contaminated soil have left the contingency fund for the project “more than depleted,” at a deficit of $69,537, according to City Manager Chuck Stearns, who has outlined four budget options for the council to consider on today.

“To replenish the contingency account, we do need to request an increase in the budget for the project or we will have to find other costs to cut,” Stearns advised in his staff report to the council.

The council will be asked to approve a change order of $123,641 to Martel Construction to remove Martel’s costs for the contaminated soil from the contingency account. And a decision needs to be made about how to restore the contingency fund, a reserve of money set aside to cover possible unforeseen expenses.

The city will have to further tap its tax-increment revenue fund to restore the contingency fund.

Stearns favors two of the options. One of his preferred options would approve the $123,641 change order to Martel and earmark $159,502 to the overall project budget. That would leave roughly $90,000 in the contingency account.

His other preferred option would approve the change order and add $219,537 to the project budget. That would restore the contingency account to $150,000.

Either of Stearns’ suggested options would enable the city to buy furniture for conference rooms and the lobby, he noted in his report.

It’s possible the city could be reimbursed for some of the costs associated with the contaminated soil. The city’s insurance carrier has a pollution insurance policy for which the city has filed a claim. The policy has a $100,000 deductible, but the city could recover $59,502, Stearns said.

There is also a chance the city might receive partial reimbursement from the state Department of Environmental Quality’s leaking underground storage tank fund.

The council will discuss the proposed budget increase during a work session at 5 p.m. today at the interim City Hall, 1005 Baker Ave. The topic is also on agenda for tonight’s formal meeting, but Stearns said a decision doesn’t necessarily need to be made right away to resolve the money matter.

The City Hall and parking structure are now about one-third of the way completed, Stearns reported.

When rising costs for labor and materials put the project roughly $1.7 million over budget last year, the city embarked on a value engineering process to lessen the shortfall. That process shaved some money from the project, but still left an overrun of close to $1 million that is being covered with additional tax-increment revenue.

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