Tauranga ratepayers have been lumbered with an additional $2.5 million of debt to meet a shortfall in revenue from development fees.

It follows the council under-estimating how much it needed to charge developers to pay for growth infrastructure.

The council yesterday agreed to transfer $2.53m from development fee-funded debt to loan-funded debt in the 2017-18 Annual Plan.

The council had originally budgeted to collect $800,000 from ratepayers next year to service a $32.5m loan agreed in 2011 to cover an historic under-collection of fees.

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Since then, the council had calculated further development fee shortfalls, once some of the current urban growth areas were fully developed.

Yesterday's decision will add $137,000 a year to the rate-funded debt needed to service development fee shortfalls.

A report to the meeting from strategic finance and growth manager Frazer Smith said that in many instances the council had found that the charges paid by developers were too low - given the greater information available to the council that was not available when the fees were originally levied.

"When some urban growth areas are fully developed, council expects to have a shortfall in the amount of development contributions collected. Legally, the council cannot charge current or future developments more to recover this backlog."

Neither could it offset losses in fee contributions from one growth area by gains made in another, he said.

The current shortfall across all the growth areas and infill currently totalled about $23.9m, with the rates-funded loan being so far used to pay off roading costs in Bethlehem and Papamoa of $5.4m and stormwater systems in Papamoa of $6.1m.

The other shortfalls that most concerned the council were $4.1m of roading and $2.2m of stormwater costs in Pyes Pa West.

Councillor Gail McIntosh said all ratepayers over time would have to pay a share of the bad decisions made by past councils.

Councillor John Robson said the mistake was with central government and not past councils. "Central government has left us on our own and it is wrong that we have no choice...growth does not pay for growth."

The Local Government Act prevents councils from retrospectively collecting fees to make up the shortfall between actual costs and what they got back in development fees.

The financial forecasts in the report did not include "a separate write-off in relation to West Bethlehem''.

Council development contributions dilemma
- Charges calculated each year based on best information available
- Many project costs ultimately end up higher than anticipated
- Council cannot recoup fee shortfalls from developers