Dunedin City Council city property manager Robert Clark said contractors had found more of the coal-tar contamination, and had so far removed 150 tonnes of the substance and surrounding dirt and gravel.
That followed the discovery of a 10m by 5m, 400mm-deep patch of the offensive-smelling tar under a concrete pad in the basement last month.
The material is a by-product of the process in which coal was used to make gas, and was laid in the basement under a concrete pad, to prevent moisture damage.
The site was closed for about a week while tests were carried out, before work resumed after the Department of Labour determined it was safe for workers in protective equipment to begin removing the material, which could be carcinogenic if touched, Mr Clark said.
However, the Town Hall refurbishment was now "a couple of weeks" behind schedule as a result of the continuing removal of contaminated material, and the cost of the clean-up stood at between $250,000 and $300,000, he said.
The delay was not considered a major problem, as construction had been due for completion about Christmas but the official reopening not planned until March, meaning there was "spare time up our sleeves".
The $45.8 million budget for the Dunedin Centre and Town Hall upgrade also included a contingency fund of "several million dollars" to cover just such an eventuality, Mr Clark said.
"You couldn't carry out the renovation of any old building of that nature without having substantial contingency in the budget, because you come across things like this and things that are unknown as you move through the project.
"That's quite normal construction and development practice."
OCTA Associates Ltd project manager Matt Griffin, overseeing the work, said the amount of material being removed - and the cost of doing so - could yet rise, as work continued inside the building.
"There's still a lot of excavation to do in there. It [discoveries to date] would indicate we might be finding it for a while," he said.
The substance is being taken to landfill, specially treated and disposed of in an area designated for contaminated material, under the management of Delta.
