TASWATER is seeking $6.8 million a year from the Launceston City Council for the new sewerage and stormwater system.
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The figure, which was initially set at $5.8 million a year in 2013 - and is being disputed by council - was revealed in the agenda for Monday's meeting.
Council and the water authority have been in arbitration since the end of June, when mediation failed.
"This process involves an independent umpire who can require the parties to present evidence to substantiate their claims," council general manager Robert Dobryzynski said yesterday.
"This process is continuing with the discovery of documents between the parties and we are hopeful for an early and equitable resolution.
"Clearly, an impost such as the figure claimed by TasWater would need to be justified by them and would have a major impact on the council's service delivery programs moving forward."
Mr Dobryzynski would not say if the council may seek to increase rates to pay the bill.
If so, according to The Examiner's calculations, this would equate to about $243 per ratepayer.
The council increased rates by 2.5 per cent this financial year.
With an operating budget of just over $69 million this financial year, the council has been cautious with funding additional programs since it was revealed it may be hit with such a bill.
This was seen in its refusal to fund an at-risk youth program and strictly abiding to its annual sponsorship allocation of $177,700.
A TasWater spokesman had little to say but the process, "is progressing with preparations for arbitration in accordance with directions from the arbitrator."