South Dunedin hub cost could run to $10 million

South Dunedin's new community hub and library could cost close to $10 million - nearly double its original budget.

The Dunedin City Council added an extra $500,000 to $5.2 million it had already set aside for the project during the deliberations on its 2019-20 annual plan last week.

In March, the council announced it had bought a site at the corner of King Edward St and Macandrew Rd for $4.7 million.

The additional money would be added to another $500,000 already in the budget and used for remedial as well as design and consultant work.

Council community services general manager Simon Pickford said while it was not definite, the entire project - including the purchase of the building - would probably cost about $10 million.

Building costs had increased substantially since the hub was announced four years ago and the council had bought a larger site than was first anticipated, Mr Pickford said.

Any increase would need to be voted on by the council during its annual or 10-year plan process.

The original budget had always been seen as a placeholder until a more detailed plan of what the site would contain was made, he said.

While the rateable value of the site was only about $1.9 million, it was last valued in 2016 and that valuation did not reflect the commercial returns the building would generate from tenants.

''What the community has come back and said several times is they want this to be an ambitious project that's going to meet all their needs, not just a library.''

Negotiations with two of the site's nine tenants, Veggie Boys and Para Rubber, were in the final stage and the council hoped it could come to an agreement with them soon.

Both have long-term leases.

Once those agreements had been finalised the council would start working on a timeline for the completion of the hub, Mr Pickford said.

The seven other tenants would remain, as the entire site was not needed.

Veggie Boys owner Marty Hay said he was not in a position to discuss the future of his business until an agreement had been reached.

Despite there being a lack of available buildings of the size the business needed, Mr Hay said he was comfortable with the situation at this stage.

''We can't move forward until we have everything 100% signed off and we're just focused on keeping the business running for our customers and staff.''

Para Rubber owner Joyce Ng said she was still uncertain about what she would do with the business but held no ill will towards the council.

tim.miller@odt.co.nz