Whitefish City Council has added almost $220,000 to the construction budget for the City Hall and parking structure after contaminated soils at the site depleted the contingency fund for the project.

The project now has a total budget of $16.2 million. Council on Aug. 1 unanimously approved the additional allocation that will come from the city’s tax increment finance fund, which is the fund already paying for the project.

Cost overruns of $1 million forced Council in January to approve a new budget for the project of $16,041,549. The cost was initially approved at $14.95 million.

Councilor Andy Feury pointed out that the current increase is about 1.3 percent of the total project budget.

“This is going to put money back into the contingency and if it’s not spent it will go back into the [tax-increment fund],” he said. “Most of that [amount] was for contaminated soils that were out of our control.”

Contaminated soils were found earlier this year during site excavation at the northeast corner of Second Street and Baker Avenue. The cost to excavate, test and dispose of the soil was $159,500.

A vapor barrier liner and a vapor and groundwater extraction system was added at the site.

The unexpected costs left the contingency fund for the project with a deficit of $69,537, according to City Manager Chuck Stearns. Stearns said to replenish the contingency it became necessary to request an increase in the budget or find other costs to cut.

“Once we’re not digging and we’re out of the ground the costs are much more predictable,” Stearns said. “Most of the contingency gets used when you’re digging.

Council approved a change order of $123,641 to Martel Construction to remove Martel’s costs for the contaminated soils from the contingency. It also approved adding almost $220,000 to the overall project budget to cover the costs and leave $150,000 in the contingency account.

“When you increase the contingency account, don’t think we will spend all of that, but things come up,” Stearns told Council.

Adding money into the budget to restore the contingency fund, will allow the city to cover some other upcoming costs of $28,000 and to more flexibility in the budget moving forward, according to Stearns. It will also allow the city to purchase furniture for the conference rooms and lobby, he noted.

The city may have a chance to receive partial reimbursement of the cost of cleaning up the contaminated soils through its insurance and the state Department of Environmental Quality’s leaking underground storage tank fund. The city has submitted an insurance claim through the Montana Municipal Interlocal Authority and Stearns expects that may cover as much as $59,500 of the total contaminated soils cost of $159,500.

Rising prices for materials and labor for the parking structure portion of the project drove the cost of the project higher than estimates and by the end of last year the project was projected to have a $1.7 million budget shortfall. Council approved a cost-savings plan, but was still left with an overrun of close to $1 million that was approved to be covered with additional tax-increment funds.