Heavy machinery rests at the construction site for the upcoming, 104,000-square-foot headquarters of the Salem Police Department. City and police officials say they need to find another $4 million for construction. (Troy Brynelson/Salem Reporter)

Costs for Salem Police Department’s new headquarters continue to rise, sending officials to look for millions more from city funds, and urban renewal once again is expected to be tapped.

Next month, the city plans to hire the rest of its subcontractors, like plumbers, carpenters and electricians, but rising wages have the city looking for another $4 million.

The additional costs emerged during a recent meeting between city administrators, three city councilors and DAY CPM, the city’s consultant on the multimillion-dollar public project.

“Part of the challenge here is our timing — the red-hot construction market, which I don’t think we fully appreciated when we asked the voters to approve the bond amount,” said City Manager Steve Powers at the meeting.

The city will find out just how much more money will be needed when bids for those jobs open Thursday. Contracts will be awarded by mid-April.

Ricardo Becerril, project manager for DAY CPM, told Salem Reporter that the relatively short supply of construction workers these days has more bargaining power to call for higher wages.

“It’s a subcontractors’ market right now,” he said. “You can talk to subcontractors right now and they’ll say they have dozens of projects coming in and they get to pick which ones they go after.”

Becerril said DAY CPM works with estimators to ensure costs align with the market and tries to ensure as many subcontractors are applying for jobs to keep bids competitive.

Broadly, construction work pays $48,000 a year in Salem, according to the Bureau of Labor Statistics, though specific trades can vary. The annual wage, though is up $2,000 a year from 2012.

Workers can earn more up the road in the Portland area, where construction pays $56,000 a year, according to the bureau, up $5,000 a year from 2012.

Costs of materials like steel and wood have also risen in recent years.

Because costs continue to rise, the city’s earlier estimates are again falling short.

Voters in May 2017 approved a city bond to pay for a three-story police building at a cost of $61.8 million, at the corner of Commercial and Division streets.

That bond covered an estimated $43.2 million for construction and $18.6 million in soft costs — like permits, buying the land, and even furniture.

The construction budget did rise last year when the city made money from selling the bonds at higher prices, according to Deputy Police Chief Steve Bellshaw. Those premiums and the money saved from interest payments gave the project an extra $4 million. The public works department gave $600,000 from its own budget.

Last July, the city received $2 million from the Riverfront-Downtown Urban Renewal Area, bringing the construction budget to nearly $50 million.

The recent meeting, however, shows construction costs to be about $54 million – and the total project to $73 million, an 18 percent increase from the original bond.

That number could change when prime contractor, JE Dunn, provides the city its final estimate for the construction on April 19.

“It’s possible JE Dunn has been a little bit conservative and they come back with better estimates,” said Becerril. “It’s also possible that it’s the opposite, that they were too aggressive and the numbers might come back more.”

The city has already shaved more than $4 million in planned work for the police department by switching to cheaper materials in some interior design work, reducing parking and even scaling back the number of windows it treats with a security film.

“We have worked really hard and we keep cutting things down and eliminating different things in the building,” Bellshaw said. “Even when we reduce it, the costs go up and it’s like you’re trying to stand in front of the current but it’s running you over.”

The building also lost about 10,000 square feet and now measures in at 104,000 square feet.

The city is sure where it can find an extra $4 million to cover the latest escalation in costs.

About $1.2 million in contingency funds would be tapped and another $350,000 would come from the police department’s budget.

Then $2.5 million will be asked to come from the Riverfront-Downtown Urban Renewal Area, if approved by the city’s urban renewal agency. Urban Development Director Kristin Retherford said the urban renewal project has cash to spare.

“We don’t have anything right now that’s in our to-do list that we would not be able to do if we put this money into the police station,” she said.

The $2.5 million would come from money set aside for grants for improving downtown. Retherford said the city budgeted $5.6 million for improvement grants, but no more than $3 million is likely to be needed.

Have a tip? Contact reporter Troy Brynelson at 503-575-9930, troy@salemreporter.com or @TroyWB.

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