The Palmerston North City Council says an upgrade to the city's waste water treatment plant to halt phosphorus discharge into the Manawatu River has not worked effectively.
High levels of phosphate have been recorded in the river since the council opened its wastewater plant in 2003.
A $13 million upgrade was completed in 2008, but a new report released on Wednesday shows phosphorus algae levels have grown three times faster since then at a site downstream from the plant.
The report was commissioned by the Palmerston North City Council and Manawatu-Whanganui regional council after they had a major disagreement over the accuracy of data collected from the river.
The report found that phosphate remains at high levels, but that is because of what is called a sponging effect - where the phosphate is absorbed into the riverbed, then released during high flow.
It was previously thought the pollution was coming solely from the wastewater plant itself.
The two councils are working to find a solution.
The city council says it is clear that nutrients emanating from treatment plant discharge are the likely cause of the problem.
Acting chief executive Ray Swadel says a review of resource consent conditions ito be carried out with the regional council might mean a further upgrade of the plant is needed.
He says it is like putting fertiliser in the water so that unwanted plants and algae grow, affecting insect and fish life.
The report's author, scientist Keith Hamill from Opus International, says the levels of phosphorus in the river are of serious concern, as it can change the ecosystem in the river.
He says the phosphorus has to be contained as it is causing unwanted plants and algae to grow, affecting the future of insect and fish life.
Palmerston North mayor Jono Naylor says there is a plan to fix the problem. It will be discussed by councillors next week.