Walkers enjoy a stroll on a completed section of the Otago Peninsula shared pathway. Photo by Stephen Jaquiery.

Another $20 million jump in the cost of the Peninsula Connection project has highlighted the squeeze on infrastructure spending, just as Dunedin city councillors sit down to budget for the coming year.

A series of reports released ahead of the council's 2019-20 annual plan deliberations, which begin this week, have revealed the cost of completing the Peninsula Connection has increased again, from $44 million to $64 million.

The council's share of the project now stands at $28 million, while the NZ Transport Agency is expected to pick up the rest.

But even within the inflated budget, there is no room for sections of the project beyond Portobello, which have been removed from the project to save another $10.5 million.

Council infrastructure services general manager Simon Drew said those sections would be completed at a later date, drawing on other council budgets, but "a bit slower".

The latest increase came after the cost of the road-widening, cycle/walkway and seawall upgrade project more than doubled, from $20 million to more than $40 million, in 2017.

At the time, the project still envisaged a cycle/walkway from Taiaroa Head to the city.

Mr Drew said the subsequent cost increase in part reflected deficiencies in the earliest planning stages of the project.

"It's always been a $60 million project, and people have kidded themselves into thinking it was something less."

But the increase also reflected the increasing squeeze on infrastructure spending as the council sought to catch up on an infrastructure spending deficit and the city - and wider Otago region - juggled other major project plans, he said.

That included the Dunedin Hospital rebuild, Aurora's network upgrade, the University of Otago's ongoing building programme and the council's own plans, from a central-city upgrade to the city's waterfront development.

The council was already experiencing problems attracting tenders from stretched construction companies, leading to "upward pressure" on construction costs, and that was expected to worsen, he predicted.

The revised 2019-20 budget, to be considered this week, also included $16.9 million in accelerated three waters capital spending - including on stormwater problems - among other budget changes.

As a result, the total capital budget for 2019-20 would increase from $89.16 million to $124.9 million as money was brought forward from later years in the 10-year plan.

The council's financial strategy still limited the organisation to core debt totalling $350 million, but the challenges posed by projects in the years ahead meant that might have to be reviewed, Mr Drew predicted.