Ratepayers in Dunedin are being warned that hard choices will have to be made to close an $8 million funding gap.
Mayor Dave Cull says two reviews have revealed lower-than-expected earnings from council-controlled companies - which had to borrow money to maintain dividends to council.
He says Dunedin City Holdings Ltd, which oversees many council companies, did not tell the council soon enough about the shortfall.
Mr Cull says it will have a significant impact on servicing the debt for the city's new sports stadium.
But Dunedin City Holdings chairman Paul Hudson says the council has been aware for years that it would not make good business sense to continue borrowing to pay dividends.
Mr Cull says the council has a year to put measures to cope in place. He says it could cut spending or reschedule debt.