FLAGSTAFF, AZ (3TV/CBS 5)-- Some residents in east Flagstaff say their neighborhood stinks… literally. They live by a dog food plant near Santa Fe Avenue and Country Club Drive.

[WATCH: East Flagstaff community fights with plant over dog food smell]

Nestle Purina PetCare has been working on reducing the dog food smell for years. The company insists the odor has gotten better, but neighbors we spoke with say that’s not true.

"Nauseating," Marcia Burns said as she described the smell.

"It can be pretty overbearing at times," said Daniel Esplin, who lives near the plant.

In 1976, Nestle Purina PetCare opened shop in Flagstaff. The City says it brings $54 million to the Flagstaff economy each year. In 2016, the company agreed to reduce its dog food smell by 50 percent in two phases-- saying it would foot the bill.

Engineers say phase one worked even better than expected, reducing the smell by 44 percent. However, the cost was more than estimated. Now it’s time for phase two, but Nestle Purina says the cost of phase two has gone up by about $2 million since it spent so much on phase one.

The company wants to use a modified plan for phase two, claiming it would still reduce odors by 50 percent in the end. "The original plan for phase two was to take five dryer exhausts and run it up the side of our mill building. So, now we’ll take one, run it up the side of our mill building, achieve the same results because of the success we got from phase one," said Gopi Sandhu, Director of Engineering for Nestle Purina PetCare. On Tuesday, Flagstaff City Council approved that plan, but some people say it's still not enough.

"I personally would love it to be 70 percent," said Burns. "I was at the mall, and I stepped out of my car, and I just about wretched."

Purina says phase two will start soon and be finished by October.