Mayor Bryan Cadogan said proposed road funding changes could hit Clutha harder than any other district in the country.
Maintaining the district's 2900km of roading costs more than half (51%) - or about $18 million - of its annual budget.
''We have the third-largest roading network but only 16,500 people to pay for it,'' Mr Cadogan said.
New Zealand Transport Agency funding proposals could mean Clutha's roading subsidy could drop from 61.4% to 52% over nine years.
''If central government backs off from the responsibility there is nowhere else to go for funding.''
He had not found another council in the country which would be hit as hard as Clutha over these changes, he said.
Council manager of district assets Jules Witt said if the changes became a reality the district's rates could increase between 5.5% and 7.2% to keep road funding at the existing level.
''This is likely to significantly impact the rural sector and would be untenable for many of our ratepayers - even over a significant transition period.''
If the council had to reduce its expenditure on roading it was likely economic activity would be significantly affected in the Clutha district, he said.
The importance of rural roading networks to the economy and national network was not reflected in the options being proposed.
''This factor may lead to underinvestment in significant rural roads that could adversely impact economic productivity.''
Those changes were supposed to come in for the 2015 three-year term so they would not affect this coming year's annual planning.
But it would affect the long-term plans councils had to develop for the next financial year.
Added to the mix was the NZTA's signalling of making further changes in funding for the 2018-21 term.
Mr Witt said the One Network Road Classification could have a greater effect on funding for rural districts but the problem was no-one knew what that classification would involve.
''They have clearly signalled they will look to use that funding for fit-for-purpose roads,'' Mr Witt said.
Next year, the council would have to go out to its community to inform them of the changes and what the options were to deal with them, he said.
''We'll have to start that conversation about what level of service we can afford.''
Mr Cadogan said the roading funding changes were the most challenging thing he had faced in his 16 years in politics.
''It is going to be a big political issue,'' he said.
Around Otago
Cental Otago: Bridge replacements major expense
North Otago: Changes cause of council concern
Southland: Council 'can live with' reduced funding level
Queenstown: Affordability is a major issue
Dunedin: Funding better than expected
