Niles City Council Monday night awarded a $285,000 contract to Pearson Construction of Benton Harbor for renovating the three-floor former Bank of America, 333 N. Second St. into City Hall.

“The first and second floors had some fairly recent modifications, but they still required a little bit of layout changes,” City Administrator Ric Huff told the council at a committee of the whole session prior to the 7 p.m. meeting. “The third floor has been unused or split up into rental units and most of that hasn’t been touched in 30 to 40 years.”

The drive-through bank, built in 1973, closed April 29, 2011, after being entirely vacant since February. It will consolidate city services in one location, while Chapin Mansion becomes a house museum.

Even creating “an office setting that is nothing extravagant — a Chevrolet, not a Cadillac,” the project is costing more than the $150,000 anticipated.

A factor in driving up estimates is the altered economic landscape, Huff said.

“We solicited bids pretty aggressively,” Huff said. “Sixteen contractors were contacted directly, plus internet job postings. Two general contractors gave us proposals and two sub-contractors gave us proposals for a total of four bids. In trying to figure out why so few people were interested, small general contractors decided the job was too big. People who did bid are larger construction companies,” including Maxwell and Associates of Galesburg for completion of painting, flooring and ceiling tiles for $223,600.

Sub-contractors under consideration were BC Mechanical Inc. of Niles for mechanical and plumbing renovations, $16,503; and Wolverine Electrical Contracting Inc. of Niles, electrical work, $26,603.

“Middle-tier contractors that normally bid this type of project don’t exist in southwest Michigan,” Huff said. “They either went out of business or relocated to where work is.”

Rebidding the project was an option, “but that doesn’t seem like it would accomplish much,” Huff said. “General contractors who did bid have already shown their hands.”

Or, “Stall the project and wait for winter months and rebid because it’s inside work when it slows down. If we get the work done now, by the end of October, we have a window for our crews,” which might save $6,500 for hiring a mover.

Maxwell’s bid was lower, but excluded two categories. Its references were favorable, but the city has no track record. “Fortunately,” Huff said, “the only two sub bids we got were mechanical and electrical. Our staff could become the general contractor and coordinate electrical and mechanical, but it takes them away from other jobs. Pearson, which built the law enforcement complex, uses the same two contractors, Wolverine and BC Mechanical, and will manage the entire project.”

Council approved Huff’s recommendation that 80 percent of the project be funded from utility funds and 20 percent come from general fund dollars, which Councilman Dan VandenHeede opposed.

Huff said accounting for unexpected acquisitions of 333 N. Second St. and the Gallery building at 127 E. Main St., “We should finish the year $100,000 to $150,000 in the black. You need to know ($285,000) is not all the expenses. We still have computer, phone and security systems, which are all rolled into a state grant applied for of about $127,000. We should know by Oct. 1.”

Carpeting will also be an additional expense.