A prominent city hall project in the Old South neighbourhood is now running $2 million over budget.

The city purchased the former London Normal School in Wortley Village to lease the building to the YMCA and turn the green space into a park.

Council had previously approved a renovation budget of $9.3 million.

But a new report estimates the project requires an additional $2 million because of a long list of discoveries including undocumented asbestos, collapsed sewers and higher tendering costs.

Staff have recommend city hall borrow the $2 million, since the renovations are already underway.

While he supported the project to buy the Normal School, City Councillor Harold Usher calls the additional expenses a "costly mistake".