Concerns were raised at a finance, strategy and development committee meeting that advice the council had received in the scheme was from an interested party, and a more independent evaluation was needed.
The committee was considering the future of its involvement with the Local Government Funding Agency (LGFA), a body being set up to operate as a large-scale borrower to lend to councils.
With the level of council debt rising rapidly, the agency has been put forward as a way to assist local authorities with the increasing requirement to raise debt.
But acting council chief executive Athol Stephens said it would not be the best system for Dunedin.
Mr Stephens recommended the council stick with its own company, Dunedin City Treasury Ltd (DCTL), for its financial needs.
Despite the Government promising lower interest rates, Mr Stephens, and the DCTL, have warned Dunedin would not benefit and would suffer added risk.
Mr Stephens said in the past 12 months, the formation of the LGFA had been under way, and Parliament had "nearly finished passing the legislation to enable it to start trading".
A report from DCTL chief executive John Knight said there were reasons the council should be cautious about the new agency.
Borrowing would not cover what was needed for CCOs, the council's security arrangements for debt, needed for the whole council group, would have to change, and the security arrangements for the agency had "significant risks".
At the heart of the LGFA proposal was a pricing model that suggested each participating local authority could save 0.4% on its borrowing costs.
But the report argued that would not necessarily be the case here.
Over time, when or if the model proved to be successful, the council would be able to re-evaluate its position .
But Cr Richard Thomson said at the meeting the council had sought advice from a "totally" interested party; Mr Knight was being asked if the council should replace the company he ran with another.
"I wonder if we should get more independent advice?"
Mr Stephens said the liability for the agency would be spread across the councils involved in it, and the Dunedin City Council could lose its autonomy if it became involved.
"It's a question of whether we wish to guarantee our neighbour's mortgage."
The council voted to not participate in the LGFA "at this stage", but to monitor its development and performance.
The committee would seek further advice on the issue.
