Bella Vista costs puts Tauranga Council risk reserve $13.4m in the red

A graph showing the balance of the Tauranga City Council's risk reserve.

Bella Vista costs and leaky homes provisions have put the Tauranga City Council's risk reserve $13.4m in the red.

According to information presented to the council's Finance, Audit and Risk Committee today, the reserve is used to cover unseen events not covered by insurance.

The balance of the reserve sat around $4m prior to the last financial year, when it plummeted.

The reserve was expected to end this financial year $13.4m overdrawn.

Corporate services manager Paul Davidson told the Bay of Plenty Times the overdraft related to anticipated costs for the year, rather than actual spending, with $4.2m in cash still remaining.

Anticipated costs included the roughly $4m that chief executive Marty Grenfell has previously said was the expected net cost of the Bella Vista saga.

That included operating expenses and the $14m cost of buying the properties, offset by an $11.5m insurance payment and any profits from efforts to remediate and sell the properties.

The other main anticipated cost of the overdraft was leaky buildings.

Council corporate services manager Paul Davidson told the Bay of Plenty Times some of the provision related to the Cayman Apartments.

Owners of apartments in the luxury Mount Maunganui building have launched a $36m civil suit against 16 defendants, including the council, after major defects were discovered.

Frazer Smith, manager of strategic finance and growth, said the total provision for all leaky homes cases was about $17.6m as of April.

That was based on an external legal assessment, not amounts being claimed in the cases currently under way, he said.

He would not give any further breakdown of the provisions to avoid putting the council's legal position at risk.

The committee heard any rates surplus at the end of this financial year would be put towards the fund but Smith said he was not expecting the amount to be large.

He said there was not yet any plan to address the fund deficit, but the council planned to work on one ahead of its next Long-Term Plan in 2021.

Smith said the state of the fund would leave the council vulnerable to "financial shocks" and create intergenerational debt where future ratepayers would end up paying the cost of current events.

The council would have less capacity to take on debt in the future and would face additional risks, including rising sea levels, more storms and the rise of counterfeit or inferior building products.

The four councillors who last week tried and failed to bring in a debt retirement levy called for the council to address the debt issue and stop putting it off.

Councillor Max Mason said the issue with the fund was another example of baby boomers leaving debt for "Generation Rent".

"That's our legacy."