The council had proposed cutting off-licence and supermarket alcohol sales to 9am-10pm while Mr Reilly wants hours further reduced to 10am-7pm. If the policy was abandoned the maximum hours would remain at the current limit of 7am-11pm.
In a report to the council meeting, FNDC lawyer George Swanepoel said the process had so far cost ratepayers $140,391.91 with the appeal likely to cost another $20,000.
He questioned why the council was continuing to rack up legal costs when the appeal before the Alcohol Regulatory and Licensing Authority (ARLA) would 'not resolve anything'. Whatever the outcome, the policy would have to go back to the council to be reconsidered.
''The process will simply continue until the parties give up ... The council has not been able to reconcile the differing parties and this process can go on indefinitely at great cost to the ratepayer,'' he said.
But, Jane Johnston, who is assisting Mr Reilly, urged councillors not to ''abandon ship with a slight squall ahead''.
Even if the bid to reduce off-licence hours failed, the policy contained other measures which would help meet the council's responsibilities under the Sale and Supply of Alcohol Act. The amount spent so far was small compared to the cost of alcohol-related harm in the Far North such as crashes and domestic violence, she said.
Last month Progressive Enterprises, which owns the Countdown chain, failed in a bid to have Mr Reilly's appeal thrown out on the grounds it was "frivolous, vexatious and an abuse of process".
The ARLA appeal will be heard at the Turner Centre in Kerikeri from today until Friday. Northland's medical officer of health, Virginia McLaughlin, will give evidence in support of Mr Reilly.
The Sale and Supply of Alcohol Act 2012 gives councils the power to set local rules restricting the availability of alcohol. It was passed in response to concerns about the proliferation of liquor outlets in places like South Auckland.
Any attempts by councils around New Zealand to reduce alcohol availability have, however, been fought by the industry.
Whangarei District Council's proposal is more restrictive than the Far North District Council's but has yet to reach the appeal stage. It sets a 9am-9pm limit on off-licence sales and a moratorium on new bottle stores.