Residents of the small central Otago settlement of Omakau may need to boil water for drinking for another year, until their treatment plant is upgraded next July.
The township is into its 30th day of a boil-water notice issued after flooding last month stirred up sediment in the Manuherikia River, making the water harder to treat.
The district's mayor, Tim Cadogan, said the council had budgeted $2.2 million for the development of a secure underground water source, but was yet to find one.
"Those investigations have taken a lengthy period of time and have so far been fruitless, so we are getting to the point we're going to have to invest in a better treatment plant rather than finding a better water source because it just looks like the aquifers in Omakau are going to be disrupted by flooding in the Manuherikia."
Mr Cadogan said upgrading the river water treatment plant would be significantly more expensive.