SNOHOMISH — The city is setting aside $68,000 next year to create a memorial at a former cemetery where officials once hoped to build a senior center.

Unmarked graves of Snohomish pioneers and American Indians are believed to have been found on the one-acre lot on Cypress Avenue. Snohomish officials hope to work with the Tulalip Tribes to forever mark the property as a historic cemetery, city manager Larry Bauman said.

“It’s a site that has historic significance,” Bauman said.

City and tribal leaders originally had planned to build a memorial next to a new senior center. That changed as the senior center project encountered obstacles one after another.

The city has spent about $300,000 on the senior center project, city officials said.

In late 2005, the city identified 96 places at the former cemetery where an archaeologist believes human remains are buried. That was more forgotten graves than city officials had expected to discover.

Tribal leaders believe those graves include American Indians’ remains. They protested the senior center project, and the city moved the project to a vacant lot on Fourth Street.

The cemetery had been abandoned for decades. The state built a highway through the area in the 1940s but didn’t relocate all the graves.

The city has graded and grassed the former cemetery, Bauman said. The remains have been left in place. The city also removed a small pink house in which the Snohomish Senior Center used to operate.

The city plans to set aside $68,000 for the memorial in its 2008 budget. The money comes from unused real estate excise taxes collected from property sales in 2007, Bauman said.

The project’s cost is preliminary, Bauman said. City and tribal leaders have yet to hammer out details of the memorial.

George White, spokesman for the tribes, declined to comment because the tribes’ board of directors has yet to discuss the project.

City officials originally estimated the memorial would cost a few thousand dollars, City Councilman Doug Thorndike said.

“What amazes me is the cost escalation,” Thorndike said, adding that he still supports the project.

Meanwhile, the cost also has gone up for the new senior center. Supporters of the project held a groundbreaking ceremony earlier this year, but actual construction for the 6,000-square-foot center on Fourth Street has yet to start.

The city recently rejected bids for the construction of the new center. The bid was $1.75 million, Bauman said. That was more than the project’s original estimate of $1.5 million.

Supporters of the new senior center have raised about $1.4 million, including federal and state grants and private and corporate donations, executive director Karen Charnell said. The senior center has operated in the downstairs of a local church building for two years.

The center’s board of directors is mulling over what to do next to advance the project, Charnell said.