The work is part of a strategy aimed at making sure there is a backup water supply for the city in the event the structure over the Taieri River, which carries the city's water supply, collapses.
Council water and waste group manager Laura McElhone said the engineer's estimate for the refurbishment had come in higher than expected.
She declined to reveal the precise estimates, saying they could affect the tender price if it goes ahead, but earlier said the cost had gone from about $3.5 million to about $5.5 million.
The cost increase largely came about because the Otago Regional Council consent for the project required more work to be done than originally envisaged.
Despite the blow-out, Dr McElhone believed the project would go ahead, as early as this summer, because the alternatives for securing the city's water supply in the event of emergency would cost much more.
This included moving one of the pipes from the bridge across the Taieri River under ground, which would probably cost about $15 million.
However, the significant cost increase meant it was ''right and proper'' to re-examine options,
including decommissioning the reservoir, which she believed the council was unlikely to support, or partly restoring it, which would mean it would not be able to be filled to capacity.
Given the cost increase, other council work would need to be delayed if the project proceeded.
At present, Ross Creek Reservoir was only partly full because of the crack in the dam, but once restored it would act as a backup in the event of an emergency when other parts of the city's network were knocked out.
With Ross Creek fully operational, a worst case scenario in an emergency went from one where parts of the city were without mains water for months to one where water restrictions would be required during the summer.
