SEQUIM –– With golden shovels in hand, city officials ceremonially broke ground for a new civic center Thursday after learning earlier in the week that the building on the 100 block of West Cedar Street will cost $1 million more than the original estimate.

The council also is considering condemning a neighboring yellow house to provide parking.

On Thursday, Mayor Candace Pratt, along with council members Laura Dubois, Ted Miller, Dennis Smith and Genaveve Starr and City Manager Steve Burkett, flung the first few shovels of dirt alongside the new City Hall/police station’s designers and builders in the official groundbreaking ceremony while workers continued to build the form of the new building behind them.

“This is an exciting day,” Burkett said during the ceremony at the construction site.

“Something like this doesn’t just happen.”

When it is built, the city’s administrative offices, public works department and police station will share a single building for the first time.

City departments are now spread among rented buildings throughout the city.

Although work began on the site in April with the demolition of the old City Hall and other buildings purchased by the city, the actual construction of the building began Wednesday.

Lydig Construction of Seattle is building the civic center under an $11.85 million-maximum contract. The building was designed by Integrus Architecture, also of Seattle.

The new civic center is expected be finished next June.

Despite some “hot potato” emails between contractors and city officials, that time frame is still on, Burkett said.

“Bottom line is, we’re on schedule,” he said.

Speaking of bottom lines, Burkett told the council Tuesday the actual total cost of the 34,000-square-foot building is $16,074,200, well above the previous $15 million estimate.

Some of the changes in the total price tag were due to costs spent toward the new civic center in prior years that have now been assigned to the building, he said.

“A year ago, when I first did the estimate, I hadn’t included some of the costs from 2011 and 2012,” Burkett said.

“The budget has not changed, but the total cost has.”

Costs like moving offices out of the now-demolished City Hall make up a portion of those costs.

He added that the cost of preparing the site increased as Lydig’s subcontractors discovered fuel storage tanks that were buried under the site and had to remove contaminated soil that surrounded the tanks.

On the savings side, Burkett said the city spent $50,000 less than budgeted to acquire high-density storage units that will be used to store police evidence.

One issue that may delay construction is the possible condemnation of a house owned by Steven and Peggy Sutherland of Renton at 191 W. Spruce St. that the city wants for City Hall parking space.

The city will have a hearing on whether it can claim the property as eminent domain at 6 p.m. June 9 at the Sequim Transit Center, 190 W. Cedar St.

The Sutherlands agreed to sell the house to the city for $89,000 but owed $140,000 on a mortgage, Burkett said.

“The financing company has been working with us, but it has taken years so far, and no end is in sight,” City Attorney Craig Ritchie said.

“The only possibly speedy alternative is to use the power of eminent domain.”

Burkett noted that demolition crews would have to tear down the building if the city takes over the house through eminent domain.

Tacoma-based Dickson Co. did most of the demolition work on the City Hall property in April under a subcontract with Lydig. Bringing them back to tear down the Spruce Street house would lead to additional costs, he said.

“If we would have owned it at that time, it would have been down by now,” Burkett said.

The city is paying for the project primarily with a $10,439,000 bond issued at a 4.53 percent interest rate last July.

The first payment this year will cost the city $580,000.

The bonds will be repaid from several sources: $225,000 from a public safety tax approved by voters in 2012, which raised the city sales tax by 0.1 percent; $200,000 from elimination of current rent for city office space, including the Sequim Village Shopping Center spaces; $75,000 from the real estate excise tax; and $160,000 from excess budget capacity.

Other funding sources include $2,190,200 in reserved funds from real estate excise taxes and operational savings; $1.5 million each from the water and sewer funds; $275,000 from the 0.01 percent public safety tax approved by voters in 2012; and $170,000 in expected real estate excise taxes for 2014.

Lydig, based in Tacoma, has been paid $941,620 to date, Finance Director Elray Konkel said. The city’s budget calls for an additional $10,954,510 that will be due to Lydig by the time the civic center is built.

The city paid $109,239 in pre-construction work like site analysis, environmental testing and permits.

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Sequim-Dungeness Valley Editor Joe Smillie can be reached at 360-681-2390, ext. 5052, or at jsmillie@peninsuladailynews.com.