Richard King (57), chief executive since July 1986, was involved in a car crash last month in Invercargill, after which he recorded a breath-alcohol level of 584mcg.
His council car and a BMW were damaged in the August 28 accident.
Mr Shadbolt said an extraordinary meeting of the council, which was "tense and extremely difficult", was held on Tuesday night to discuss Mr King's future.
Mr King had brought the council into disrepute, and his accident was case of serious misconduct.
He had been issued with a first and final written warning, the highest penalty short of dismissal available to council, Mr Shadbolt said.
Mr King, who earns more than $200,000 a year, was to be responsible for all costs, which amounted to "tens of thousands of dollars".
After the meeting, which took several hours and was "fairly heated", Mr King was brought in to hear council's decision.
"I think he was resigned to whatever punishment was put in front of him," Mr Shadbolt said
It had been a difficult time for Mr King, who was prepared to "throw himself on the mercy of council".
Mr Shadbolt declined to comment on what Mr King had been doing before the crash.
Mr King is scheduled to appear in the Invercargill District Court on September 25.
