Tauranga City Council has voted against introducing a new levy on ratepayers in spite of a $128 million big project "budget blowout" that puts it at risk of breaching its debt ceiling.

The split decision yesterday, swayed by Mayor Greg Brownless' casting vote, came after a heated debate about how to pay for the city's increasingly expensive growth.

Discussing the draft Annual Plan for 2019-20, councillors heard that in the past six weeks staff had reviewed the council's capital projects for the next 10 years.

The $2 billion-plus programme included everything from the $145m Waiari water treatment plant to streetscaping.

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The review found that since the budget was approved last year, project cost estimates had blown out by $128m.

Strategy and growth manager Christine Jones said major growth infrastructure projects saw the biggest escalations.

The most significant were: Waiari, the Te Maunga wastewater treatment plant upgrade, the stormwater system for Te Tumu and the Pāpāmoa East Interchange.

Capacity in the construction industry was part of the cause - fewer tenderers, tender prices well over cost estimates - as well as design changes and having to make infrastructure more resilient to natural disasters.

Jones said the council was working with the Government to investigate other "funding mechanisms" that could take some of the infrastructure debt off the council's books.

"In the pipeline, there are potentially some tangible and real options to deal with the challenges ... but we don't know when and how and to what scale they will come to fruition," she said.

The council is required to ensure its debt does not exceed its revenue by more than 250 per cent a financial year. The extra $128m would push it over that ratio cap in a few years' time and drive up the council's interest rates.

A "debt retirement levy" - an extra charge to ratepayers - was proposed by council staff to bring in enough extra revenue to keep the ratio closer to the cap.

Council chief executive Marty Grenfell and top financial adviser Paul Davidson said the levy - last used in 2009 - would acknowledge to residents and central Government alike the serious funding issue the city was facing over the next decade, and take a small yet financially prudent step towards addressing it.

The average rate increase for 2019-20 was indicated at 3.7 per cent in December, slashed from an initial 7.5 per cent.

The levy would have boosted that increase back to the initial 7.5 per cent.

Half of elected members, however, rejected the levy idea, with Brownless' objection sealing its fate.

Councillor John Robson called it a "kneejerk reaction", councillor Steve Morris called for a project cull and Brownless said the levy "let the Government off the hook" and did nothing to stop contractors regarding the council as a "cash cow".

Others argued it was the responsible thing to do.

Deputy Mayor Kelvin Clout said the reasons for the "budget blowout on capital expenditure" were explainable and the community would understand the landscape had changed since December.

Grenfell said he had legal advice the council needed to consult with the community on the rates increase.


Debt retirement levy: How they voted

For: Larry Baldock, Leanne Brown, Max Mason, Kelvin Clout, Terry Molloy
Against: Greg Brownless, John Robson, Steve Morris, Rick Curach, Bill Grainger
Casting vote: Greg Brownless, against
Absent: Catherine Stewart