Matt Gentry | The Roanoke Times

The town of Blacksburg purchased the old Doc Roberts Tire Co. building on South Main Street for $1.8 million.

BLACKSBURG -- Unforeseen pollution and structural problems have pushed over budget a project to convert the old Doc Roberts Tire Co. into a town hall annex and environmental showplace, officials told town council Tuesday.

Town Manager Marc Verniel and project manager Adele Schirmer asked the council during a work session to consider a $200,000 budget amendment to cover repair of unanticipated structural defects, as well as environmental remediation needed since June, when petroleum contaminated groundwater was confirmed at the site.

The council agreed to put the amendment on its agenda for a public hearing and possible vote Jan. 12.

"We are not overdrawn at this point," Schirmer said. "But we will overspend."

The project, including purchase of the historic property on South Main Street, was originally budgeted at $5.1 million and is scheduled for completion in February. When it opens, it will house the town's planning and engineering departments and is meant to showcase the latest in energy conservation technology and low-impact development.

The budget included a $100,000 contingency fund recommended by Schirmer and Verniel. As a percent of the total project cost, Schirmer told the council, the contingency budget fell slightly below the industry standard of 5 percent to 10 percent for major commercial renovations.

According to records, of the $143,250 spent for contingencies so far, $69,087 is related to petroleum contamination found in an elevator shaft in the basement in May and again during drilling in July of 24 wells for a geothermal heating system. The town worked closely with the Virginia Department of Environmental Quality to deal with the pollution, state officials have said.

Verniel told the council extensive environmental testing of the site before construction made staff feel "pretty confident we weren't going to run into these things."

But the town manager allowed that staff had perhaps been too conservative in budgeting for unforeseen problems at the site, which for more than 80 years was used as a gasoline and oil distribution center, a car dealership, a glass and radiator shop, and a tire store and garage.

Last year, three petroleum storage tanks and polluted soil were removed from the site before the council purchased it for $1.8 million. Subsequent tests showed contaminated soil remaining in several areas on the property, according to documents filed with DEQ.

Soil and groundwater under the building's foundation could not be tested before construction began, however, and that is where the biggest problems arose. Schirmer said that after renovations began, a fourth underground petroleum storage tank was found in the northwest corner of the building. A plume of groundwater contaminated from past tank leaks also flows there. Missing foundation footers and other structural problems uncovered during excavation were also found and must be repaired, Schirmer said.

After the meeting, some council members characterized the shortfall as a lesson learned, but said they remained optimistic about the project.

"They did clearly under budget," Vice Mayor Leslie Hager-Smith said. "It's disappointing. Times are tough and the budget is getting tighter. But this is not a huge overrun ... we're better off to have repaired and cleaned up that property."

Mayor Ron Rordam, an enthusiastic supporter of the project, told the council, "These are the kind of projects we need to be taking on because the private sector isn't taking them on. If we want to be sustainable, we've got to take the lead."

Rordam pointed out that without town intervention, the building -- which is listed on the National Register of Historic Places -- could have been demolished for commercial development.

While Councilman Derek Myers acknowledged the staff's conservative budgeting was risky, overall the project is "going to in some ways put the town on the map. ... I think it's going to set a good example."

If approved, the $200,000 in extra funds will come from the town's general fund, Deputy Town Manager Steve Ross said.

Schirmer pointed out that a portion of the increase could be offset with historic tax credit revenues. Tax credits, which are calculated based on a percentage of the overall renovation costs, are expected to be a major funding source for the project.