WORCESTER – The cost to renovate the second floor at Union Station for the new headquarters of the Cannabis Control Commission is about $300,000 more than what was anticipated and what the city will be reimbursed for that fit-out under its lease agreement with the state.

As a result, unless the city can negotiate an adjustment to its 10-year lease with the state for the space at the historic train station, it will be responsible for picking up that tab.

John Odell, the city’s director of energy and asset management, told the Worcester Redevelopment Authority board Monday there is no mechanism in the current lease arrangement for the city to recapture those costs.

He said those costs could subsequently be recovered if and when a second lease for the space is negotiated in the future.

The WRA owns and operates Union Station.

While the WRA is an independent agency, it relies on the city for its funding.

The Cannabis Control Commission occupies roughly 15,000 square feet of space on the second floor of Union Station. It moved into Union Station last November, becoming the first state agency to have its headquarters in Worcester.

The WRA board Monday approved another change order for design services relative to the build out of the CCC office, raising the total project cost to about $2.3 million.

In 2019, the City Council approved a $2 million loan order to fund the renovation work. That was to cover the demolition of what existed in that space before, as well as the installation of new metal stud walls, replacement of wood trim and chair rails, sound insulation, window and door replacement, signage, fire protection, plumbing, HVAC, electrical and security systems.

Odell said it had been estimated that bids for the project would come in at $1.7 million, with another $200,000 to $300,000 anticipated for change orders.

The fit-out costs are to be repaid through lease payments, which will cover all city expenses such as common area costs and utilities.

Odell said the lease payments over the next 10 years for the CCC space were based on the original anticipated estimate for the project, starting with a $1.7 million base cost.

But he said the project ended up coming in at a higher starting point when the bid for the work came in at $2 million.

He said the subsequent change orders have been consistent with what had been anticipated, but they ended up pushing the total cost of the project to $2.3 million.

That comes out to about $154 per square foot.

Because of the building’s age – Union Station was built in 1911 – Odell said it was anticipated there would be some unforeseen issues as the project progressed.

“We started at $2 million and now were at $2.3 million, which is roughly exactly the same differential between what was anticipated with the bid cost and what any extra costs would be,” he said. “It’s just that we did not anticipate that the original price tag was going to be higher than the original $1.7 million project cost.

“The city will absorb those costs until the lease is renegotiated, assuming it is, for the next 10 years,” he added.

Under the terms of the lease agreement, the state will make annual lease payments for the space at Union Station, ranging from $436,199 in the first year and escalating each year after that to $499,955 by year 10.

The state is expected to make a total of $4.66 million in lease payments to the WRA for the office space over the term of the agreement.

City Solicitor Michael E. Traynor, who is also the WRA’s chief executive officer, said he plans on looking into the matter with the state Division of Capital Asset Management and Maintenance, which negotiated the lease with the WRA.

He said he recalls a similar instance many years ago when the basement of the Worcester Memorial Auditorium was renovated into Juvenile Court.

Traynor said when the cost to renovate that space at the auditorium came in higher than the reimbursement the city was to receive under the lease agreement, he recalled that DCAMM had a “true up” after all the costs were determined.

“It’s my recollection, and I could be wrong, that DCAMM made us whole for the Juvenile Court at some point,” he said.