The marquee says, “Welcome to the Palace,” but for a couple more months at least, hard hats are required for anyone visiting the historic theater in downtown St. Paul.

St. Paul officials expect to complete the renovation of Palace Theatre by the end of this year, which marks the 100th anniversary of the building that opened in 1916 to host vaudeville performers.

How the city got to this point in the renovation process rankled City Council members Wednesday, when they received an update on project funding.

Palace Theatre — located on W. 7th Place, the pedestrian-only block between St. Peter and Wabasha streets — has been closed for nearly 40 years. First Avenue and Chicago-based concert promoter Jam Productions will manage the 2,800-person venue when it opens.

The road to opening night has been more expensive than anticipated, as the city dealt with deterioration in the long-abandoned building.

City officials approved a $14.7 million budget last year for the overhaul, but are now looking at nearly $15.7 million in costs, Planning and Economic Development Director Jonathan Sage-Martinson told the City Council. The initial cost estimate for the project was $12 million.

Construction bids came in over budget, and unforeseen expenses, such as the need for sump pumps in the theater’s basement, contributed to the rising cost, he said.

To cover the additional $1 million, city staff used $118,000 in land assembly bonds and $882,000 from the city’s Koch-Mobil redevelopment project. That project along W. Seventh Street came in $2.7 million under budget, Sage-Martinson said.

City Council members, who are in the midst of creating the 2017 budget and are struggling with limited finances, said Wednesday they were surprised to learn that the city has an extra $2.7 million that is being tapped without their approval.

“It’s not what taxpayers would expect,” Council Member Jane Prince said, and asked to look into it further. Council Member Chris Tolbert called it “absurd” that city staff can transfer those funds from one project to another without policymaker oversight.

“We put a lot of money into [the Palace Theatre] and there’s a lot of needs in the city,” Tolbert said.

However, other City Council members noted they would have felt obligated to pay for the overages, given how far along the city is on the Palace project.

The renovation is 85 percent complete, Sage-Martinson said, and construction is scheduled to wrap up in December. When finished, Sage-Martinson said the theater will attract millennials — a group that is currently not served by the downtown St. Paul cultural scene, which caters more to families, children and older adults.

Palace Theatre, which will be twice the size of First Avenue, is projected to bring more than 100,000 people to downtown St. Paul every year, he said.

“The purpose here is really to add to the downtown entertainment district,” he said.