A separate pool of $18,200 has also been set aside to cover "unforeseen work," the report said.
"The market is in my district," said Councilman Michael Henn. "I'm very much in favor of the project. It will provide a lot of flexibility for the city. Some of the property owners in the area will be now able to redevelop. It's an important building block to support the revitalization of Balboa Village."
The city purchased the land for $3.5 million in January 2009. The sale involved contiguous land at 608 E. Balboa Blvd. and 209 Washington St.
The Balboa Boulevard property had an assessed value in 2006 of slightly more than $3 million, according to county records.
For 71 years, the market was a sort of landmark at 608 E. Balboa Blvd., but has been vacant for four years. The market's 1995 mural will be lost when the property is demolished, but city officials have said they hope to preserve at least a piece of it.
Officials are considering a small-scale monument that would save a part of the mural, and the artist has reportedly offered to paint another mural, if space is available.
A surface lot that borders the property will now be expanded, potentially offering more parking spaces for the nearby Balboa Fun Zone, the Newport Harbor Nautical Museum and an assortment of family-run shops and restaurants.
The city is also thinking about installing parking meters along a few blocks of East Bay Avenue, from Palm Street on the east to the 300 block on the west. Nearby Coronado Street would also have parking meters.
But such a move was met with opposition by local residents at last week's city council meeting, and the issue will now be studied further, according to Tara Finnigan, the spokeswoman for the city.