Annual costs associated with the MTG are expected to jump more than $500,000 above this year's forecast, forcing the Napier City Council to draw on contingency funds to cover a shortfall in its budget.

The Museum Theatre Gallery Hawke's Bay's latest financial woes are outlined in papers prepared for a meeting of the council's finance committee on Wednesday.

As part of its half-year budget review for the financial year ending June 30, the council has identified a $553,600 increase in expected costs of running the cultural facility, which has struggled to attract the number of visitors expected.

"We acknowledge the MTG provides us with a challenge but we are dealing with it and it needs to be noted that changes made in recent months will take time to take effect," council chief executive Wayne Jack says in the budget review paper.

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"A restructure was undertaken in 2014. However it takes time to embed those changes and therefore the financial impacts will not be resolved in the current year."

As well as revenue for the financial year being lower than budget, the council is facing $125,000 of additional unbudgeted storage costs associated with the MTG. When the facility was re-opened in September 2013, following an $18 million upgrade, a shortage of museum artifact storage space was discovered.

Storage cost issues have been exacerbated by delays in finalising the council's plans to build an off-site storage facility to deal with the issue. In the meantime it is leasing space to store part of the collection.

The council has delayed finalising its storage facility plans until they have been reviewed by new MTG director Laura Vodanovich who started in the role last week.

"I am confident the expertise of the new MTG director in this area will provide us with a solution going forward," Mr Jack said in the finance committee report.

The council plans to use a $350,000 uncommitted contingency fund to re-balance its annual budget.

Annual MTG operating costs - previously budgeted to be $2.1 million excluding storage costs - would be reduced by $220,000 through the repayment of a $5 million internal council loan raised to part-fund the redevelopment, the report says, and councillors are being asked to vote to retire the debt in a separate item on the agenda for Wednesday's meeting.

"The costs of MTG Hawke's Bay were higher than those estimated at the time the project was put together. These costs include power, and personnel costs associated with a larger building footprint," a report on the loan retirement proposal says.

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"Loan interest costs were planned as part of the ongoing operational costs of the Museum/Cultural Trust, however, lower revenue from operations has resulted in a higher net ratepayer input than anticipated."

Napier Mayor Bill Dalton said there was no denying there were "operating issues" with the MTG.

"However Laura [Vodanovich] has hit the ground running and whilst she can't change things overnight we don't want to lose sight of the fact that if you go to Te Papa or anywhere, these things cost money [to run]."

"We've got a fabulous asset there and what we have to do is work very hard to minimise the cost to the ratepayers but we'll never eliminate that cost completely with an institution like this."

Speaking to Hawke's Bay Today on her second day in the role last week, Ms Vodanovich said it was too early to outline her plans to improve the facility's performance.