Whitefish City Council took a first look Monday at a plan that begins to chip away at a projected cost overrun for the new City Hall and parking structure under construction downtown.

City Council learned in December that an estimated $1.7 million budget shortfall was projected for the project. Council unofficially gave its OK to a cost-saving plan last month that would immediately lower that shortfall to around $990,000.

Continued budget crunching by City Manager Chuck Stearns over the holidays dropped that estimate to $882,669, with a suggestion it could lower even further.

Stearns defended the project at Monday’s meeting.

“There’s been a lot of controversy and concern over the cost of City Hall and the parking structure,” Stearns said. “In most communities I’ve been in, if we were building a $15 million building without a general property tax increase or general obligation bonds, we would probably be regarded as heroes and carried around. Most communities would be very jealous that we can build this sort of structure and do the other things we’ve done without raising project taxes. We sometimes get vilified for our success.”

The city is using saved tax-increment finance fund money to pay for City Hall and the parking structure project. Those funds are separate from general property taxes.

Council did not vote Monday on any design changes or modifications to the budget. It’s set to take up the matter at its Jan. 19 meeting when it will consider a multi-step plan presented in December and several other cost-saving measures outlined for the first time during Monday’s meeting.

Stearns reminded council that the City Hall and parking structure is a large and complex project, and the total cost overrun from the budget is 5.9 percent. Using the lease revenue, as new, non-tax-increment funds, the gap would drop to 4.2 percent, he noted.

Stearns said refinement of the costs and continued value engineering brought the number down. He also suggested the use of three years of lease revenue for the planned retail space inside the parking garage as a way to add $162,0000 to the project and reduce the funding gap even further.

Assuming council approves the myriad of cost-saving items and budget adjustments as previously presented, it still remains hamstrung by the $14.95 million budget it approved in June 2015 for the project and will likely have to consider increasing the amount of TIF money spent. After refinement of costs and the use of lease revenue, Stearns estimates the budget shortfall would be at $720,699.

“Please bear in mind that this figure can and will continue to change and could go up or down,” he said.

On Monday, Stearns presented a new set of cost reducing plans for the City Hall and parking structure to be considered by council. Among the options were reducing the owner’s representative hours, eliminating new furniture, using resort tax revenue, delaying improvements to Depot Park while moving that money to the City Hall project, rebidding the concrete and rebar work, and delaying the removal of the planning and parks department building at Depot Park so the building could be rented.

Eliminating the purchase of new furniture for the building could save an estimated $420,000.

“We do have a lot of furniture in the interim City Hall and new furniture could be purchased later,” Stearns said. “However, that does transfer the cost from TIF money to the general fund and after that we can’t say that we built City Hall without the use of general tax revenue.”

Using resort tax funds has been suggested to allocate between $80,000 and $150,000 to the project for sidewalk, street lights and street furniture. Resort tax paid those costs for the downtown Central Avenue project.

Stearns said he would prefer council use TIF funds over resort tax funds because the use of resort tax money could delay work planned for Somers Avenue.

Stearns said the “most viable option” is to delay planned improvements to Depot Park. The city has a $10,000 grant to construct a gazebo in the park, so Stearns suggested that project move forward, but delay street, sidewalk and corner hardscaping work. Renting of the city’s building at Depot Park could bring in an estimated $35,000 per year.

“We can fund the $720,699 with additional TIF funds, but it will probably delay most of the remaining work on Depot Park by two to three years at least,” he said.

In December, Stearns provided a cost-savings plan that asked council to approve about $230,000 in cuts that would eliminate a number of amenities from the project including removing skylights, canopies and other design details; approve value engineering changes of $180,000; adding the lease payments into the budget; and allocating $200,000 left over from the ancillary costs fund of the budget.

Council didn’t vote on that plan, other than to approve retaining a second elevator in the southwest corner of the parking structure, which added $90,000 back into the project cost.