Lincoln University has confirmed it is cutting a third of the staff at its Telford campus in South Otago.
The former agricultural college near Balclutha was merged with the university in 2011, and gave it $10 million in cash.
Last month it proposed cutting four academic positions and 13 support roles.
Lincoln has been strongly criticised by the Tertiary Education Union and the Clutha mayor over the cuts, which involve axing the South Island's only residential horse-training courses.
Chairperson of South Otago's economic development agency, Clutha Development, said Lincoln's strategies had not worked.
Rob Hewett said it was very disappointing the way it had been handled.
"Until we know what the alternatives are that the Telford Farm Board and Lincoln have been working on we can't really comment too much further but it would be a very sad day for Clutha if Telford closed its doors. It should be a significant concern for every farmer who employs staff in the South Island."
Rob Hewett said Lincoln had a moral obligation to give back the $10 million it got from the merger if it gave the campus away.
Lincoln said it had confirmed 16 of the 17 redundancies as a result of feedback and negotiations; the only job saved has been a hostel supervisor's.
It said the changes were necessary because the courses at Telford had been heavily subsidised by North Island students.
Two other institutions, Southern Institute of Technology and Taratahi Agricultural Training Centre in Wairarapa, are investigating taking over the campus from next year, the university said.