This is a perfect example of why you codify requirements and any review for permitting is as objective as possible. In this case, it's totally subjective and will be abused to get money and other favors from developers that want the project.
This is pure corruption out in the open and they don't even try and hide it. They even mention that they might not need the full $1.7M and they'll find other uses for the money if it doesn't cost as much. This is theft of tax payer money by unaccountable officials.
Any extra money should be returned to tax payers and every single part and labor cost must be documented and justified.