The cost of large-scale water storage tanks in Hastings' CBD and Frimley Park has blown out by almost $10 million.
Ratepayers appear set to pick up $6.8m of the $9.8m increase in costs - in the form of a loan - on the project once-known as "Water Central".
Hastings District Council will decide tomorrow whether to approve recommendations to increase the budget for the Eastbourne and Frimley water - $6.8m by council loan-funding and $3m through the reallocation of central Government funds granted to council.
The council has been upgrading the water network as set out in the 2018 Drinking Water Strategy and the total cost covers eight small community water supply upgrades, the second mains water pipe connecting Hastings and Havelock North and the Frimley and the Eastbourne Waiaroha storage and treatment facilities.
The total budget for all of those projects now sits at $81.9m.
The Eastbourne and Frimley water storage and treatment facilities are the last major components of the strategy.
Of the $81.9 million, $67.8m will be loan-funded by council and $14.1m Government funded.
Council chief executive Nigel Bickle said factors leading to the increase in costs included the impact of Covid-19 on international and New Zealand supply and construction markets, and the complexity and highly technical requirements of the Eastbourne and Frimley projects.
The large projects depend on both a head contractor and broad range of subcontractors and with the Government increasing major construction projects across the country, the resulting high demand has led to a shortage of available contractors with the skills to carry out the work, he said.
Projects under way in the region and nationally have also resulted in construction material shortage and shipping delays stemming from Covid-19 globally are also impacting costs, Bickle said.
Estimating the cost of highly specialised equipment years out from purchase was "always problematic", and the council was aware at the time the water strategy budget was set in 2018 that the true cost would only be known as each stage of the six-year project went through the tender process, Bickle said.
Waiting for the construction market to return to "normal" was not an option due to Government deadlines for councils to achieve new drinking water standards.
Bickle said while cost increases are never welcome, that because of the size of the project, the timelines that must be met, and the Covid-19 impacts, they were "unavoidable".
He said the latest review shows there are projects in the capital works programme that will not be completed within current timeframes, so the loan-funding will have a limited impact on the council's overall borrowing levels.
The council will also decide on a lead contractor for the two facilities. The tender being considered this week is for the building of the two facilities, the fit-out of the specialised treatment equipment, and the construction of associated pipe work.
The budget decision will be made in an open session of council on Thursday and the tender decision will be made in a public-excluded session.