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"The effect on South Dunedin will be pretty dismal," a disappointed Mr Cull said yesterday.
It was imperative the city retained as many of the 90 skilled workers as possible, he said, as they were an important resource for Dunedin.
However, he was at least reassured that Bradken had displayed confidence in Dunedin's future by leasing the railway workshops' foundry operation.
"It's the consolation prize," Mr Cull said.
It was a shame the Government had not shown similar confidence in Dunedin as a manufacturing base, by supporting the workshops.
The Dunedin City Council part-funded a Business and Economic Research Ltd (Berl) report in 2010, which made a strong economic case for constructing rolling stock locally, rather than sending work offshore.
"The Berl report identified that there was potential, and Government policy clearly didn't allow that to be brought to fruition."
With limited funds for economic development, the council must think "cleverly" to assist the city's engineering cluster, and South Dunedin.
The council was putting considerable effort into South Dunedin, a community with significant challenges, and this latest blow would be factored in to those efforts.
National list MP Michael Woodhouse yesterday discounted the 2010 Berl report as "nonsense". He disputed Berl's financial analysis of the situation, and said the organisation provided "opinions for hire".
Mr Cull said he had no reason to doubt Berl's expertise or credibility.
Otago Chamber of Commerce chief executive John Christie said while the loss of 90 jobs was a "psychological blow" for Dunedin, he was pleased Bradken had leased the foundry.
His focus was working with other stakeholders to ensure as many of the workers were employed in the local engineering sector as possible.
Dozens of engineering businesses would be affected by a loss of subcontracting work through KiwiRail's operations winding down, he said.
Despite this, the sector was strong enough to absorb some of the laid-off workers. How many got jobs remained to be seen, he said.
Farra Engineering chief executive John Whitaker said he did not believe the impact on Dunedin businesses from the loss of subcontracting would be great, although losing the Hillside workshops removed some opportunities for work.
His company was busy, and was recruiting fabrication workers and fitters, although he could not specify how many. He was keen to employ as many of the redundant workers as possible.
Other Dunedin engineering businesses he knew of were "reasonably busy".
Asked if absorbing additional workers would reduce the number of apprentices Farra could take next year, Mr Whitaker said it would not.
South Dunedin Business Association president Jane Orbell said locals were shocked at yesterday's news.
However, she did not think surrounding businesses would close.
Rejuvenation efforts were drawing more people to South Dunedin, which would help offset the loss of KiwiRail jobs.
Local businesspeople were a resilient bunch, and were in for the long haul in South Dunedin, she said.
Methodist Mission chief executive Laura Black said the job losses were an "absolute tragedy".
She could not see how that many jobs could be absorbed in the local economy, and thought many workers were likely to leave the city.
Manufacturing was being steadily wound down in New Zealand, which took its toll in increasing social problems, she said.