A potential funding row between the Waikato Regional Council and NZTA may derail the Hamilton to Auckland passenger rail service before it has barely begun.
This comes after news that NZTA's funding for the maintenance of the service's rail carriages - estimated to be $981,000 per year - may only amount to 51 per cent of the costs involved rather than at 75.5 per cent.
The council's support for the project was subject to NZTA funding these costs at 75.5 per cent, known as a targeted enhanced financial assistance rate.
Waikato Regional councillor Russ Rimmington said the council should withdraw its support for the rail service until the issue was addressed when it meets for the first time this year on February 28.
Rimmington claimed NZTA changed the eligibility for the 75.5 per cent funding in the months prior to council approving the passenger rail service's business case.
When asked whether council and staff should have known this, he said they had met numerous times with NZTA in the leadup to the vote.
"They could see clearly that our business case was on the basis that it was at 75.5 per cent and not once did they say, 'our policies had changed'."
The Council's Transport Committee chairman Cr Hugh Vercoe played down the issue, saying Rimmington was wrong.
When the Council put together its business case for funding the project, it assumed NZTA's funding would be at 75.5 per cent.
"NZTA - when they confirmed the whole business plan and all the funding - were silent on whether that would be funded at 75.5 per cent, or the normal rate of 51 per cent."
"They haven't said no. Russ is wrong and until they say no, we don't have a problem."
Vercoe said Transport Minister Phil Twyford had told him the Government would make up the $240,000 shortfall if NZTA decided on the 51 per cent rate.
"In a $60 million project, it's peanuts."
Council staff have since written to NZTA seeking clarity, but have yet to have received a response as of February 26.
Rimmington said the project's funding conditions was always going to be the devil in the detail.
If NZTA's board decided to fund the rail maintenance at 75.5 per cent when it next met, Rimmington was confident the council could still meet the project's startup deadline of March next year.
"But anything beyond that, our council should not continue to spend money, knowing that we have a business case that is not sustainable."
In an emailed statement, NZTA general manager of system design and delivery Brett Gliddon said it was still in the process of considering its policy around what its funding rate would be for the rail service.