The cost of renovating the Rotorua Museum could swell to as much as $83 million, creating a $30m funding shortfall, a document obtained by Local Democracy Reporting reveals.

At a minimum, the cost is set to rise by $15m, according to the document.

The document is a confidential report to elected members from the Rotorua Lakes Council's Strategy, Policy and Finance Committee meeting on April 14.

This week, the council would not reveal how the committee – and later, the council – decided in the meeting, saying those details would be released once funding discussions had finished.

The council says the category 1 heritage building – which has been closed for almost six years – is an 'extremely complex” project and the mayor says she has 'every confidence” in its progress.

The report says the increase is partially due the impact of Covid-19 and inflation. The council has also found the museum would require $15m worth of geotechnical work to achieve its original earthquake safety objectives.

It shows the committee considered recommending the council reduce the building's earthquake safety rating to reduce the shortfall.

The report also reveals the council's wariness that a change in project scope could spook funders such as central government.

The project is funded to $53.5m, made up of $38m of external funding – including $22m from central government – and $15.5m from the council.

The council has spent $6.3m of the funding to date.

The report, approved by chief executive's office deputy chief executive Craig Tiriana, said the museum site could support a 70 per cent New Building Standard (NBS) rating without ground improvement work.

NBS is a way of measuring a building's seismic performance relative to a new building.

About $15m worth of ground improvements would be needed to meet the original ground strength objective of 80 per cent NBS.

If ground improvement was not required, the total cost estimate dropped from $83m to $68m-$73m, and the funding shortfall from $30m to $15m-$20m. The work would also be less invasive and quicker.

The council had found the benefit of a 10 per cent NBS improvement was not 'substantial enough” to offset the cost and risks.

Seventy per cent NBS could mean more damage to the building in an earthquake but it would remain standing. Taonga could be retrieved and 'life safety” would be preserved.

The council also changed its design early in the project, the report revealed.

The original design, which required building a new structure within the museum and 'tying” the existing structure to it, was 'unlikely to be completely buildable with high cost and time risk”.

A new design, using the 'inherent strengths of the structure”, was 'less invasive” and would cost $10m less. It would achieve a building strength – separate to ground strength – of 80 per cent NBS.

A building below 34 per cent NBS is considered earthquake prone. The New Zealand Society of Engineers recommends a minimum 67 per cent NBS. In 2016, the building was assessed to be 15 per cent NBS.

Council officers recommended the committee modify the ground NBS objective from 80 per cent NBS to 70 per cent, subject to 'funders' agreement”.

The report said if the 70 per cent NBS rating was accepted by the council, a $15m - $20m shortfall remained but the council covering it was 'unlikely to be palatable” to the community.

It recommended the council pitch for more funding from existing external funders.

Council officers considered 'stopping or pausing” the project if additional funding was not secured, but this was discounted.

'The museum has been closed for six years.

'The community [is] unlikely to accept an unknown period of further delay.”

There would also risks of further cost escalation and loss of technical expertise, it said.

A 'high level” assessment found that, within a shortfall of $0-$5m, the council could strengthen the building to 80 per cent NBS – the ground remaining at 70 per cent NBS – replace the roof, and do a fit out with services for some parts of the museum.

Council officers recommended a staged approach, opening part of the museum and seeking future funding to finish the rest.

It would be subject to funders agreeing and to securing 'design and consenting considerations”. Detailed design work would continue, expected to be done at the end of the year.

However, council officers flagged the risk of funders being unhappy with a partial opening or new scope and withdrawing funding.

The report suggested the council discuss the issues with funders as soon as possible and 'stress that they have [the] option of providing more funding to deliver full scope”.

Another risk in the report was the project becoming "a political issue in the election year” and hindering 'positive progress”.

On Wednesday, museum project lead, council Te Arawa Partnerships deputy chief executive Gina Rangi said it was an 'extremely complex” project.

She said the council assessed alternatives and brought in additional expert advice after 'buildability and risk questions” were raised in April 2021.

She said elected members had been kept informed and the last report to them was in April, with a public update planned for next month.

Rangi said things had progressed since the April committee meeting and discussions with funders were ongoing.

'We know this project is of huge local and national interest given the history and heritage value of the Bath House.

'It will be a community conversation that will be highlighted in the pre-election report, due out in August.”

She said the update in April excluded the public because it included commercially sensitive information and the council needed to talk to its major funding partners.

Rangi said ground strength of 70 per cent NBS would not adversely affect safety.

"We took careful advice on this and our consultants were unanimous this was the best option.”

The council was also asked if the opening date would be affected.

Rotorua mayor Steve Chadwick said everyone wanted to see the museum reopen, but it was a 'very challenging project”.

"There have been issues uncovered along the way.”

She said as it was a 'complicated building” the council needed to take the time to get it right.

She had 'every confidence” in how the project was progressing.

Chadwick was asked for her view of the shortfall, it being funded by rates, and whether the public had a right to hear the discussion in an open meeting.

She was also asked how she voted on the recommendations in the report.

The council announced in April last year the museum's opening would be delayed to complete more site investigations. At the time, the council said it was expected to open in 2025.

The category 1 heritage building, which is more than 100 years old, closed in November 2016 after being damaged by the 7.8-magnitude earthquake that struck Kaikoura.

-Local Democracy Reporting is public interest journalism funded by NZ On Air.