Total debt projected to reach $495m

The council yesterday signed off its long-term plan, which included a 3.4 per cent rate increase or about $66 extra a year on an average residential property valued at $430,000.

Tauranga's $63 million windfall from getting the Route K debt off its books will be largely undone within 12 months.

Latest debt figures in the city council's 10-year plan show that debt was forecast to return to within $10 million of 2014 levels by July next year and then exceed it by $45 million in 2017.

The council yesterday signed off its long-term plan, which included a 3.4 per cent rate increase or about $66 extra a year on an average residential property valued at $430,000.

The new-look council, swept into power in 2013 on community fears about debt, has embarked on a financial path that will see debt grow to $442 million by mid-2018 - 21 per cent higher than the debt it inherited from the old council, despite the New Zealand Transport Agency taking over Route K's debt of nearly $63 million.

Finance and risk committee chairman and mayoral candidate John Robson was asked by the Bay of Plenty Times to reconcile the debt forecasts with his election campaign, which included criticism of Tauranga's "ultra-high" debt.

He said the rates-funded portion of debt was falling, from 72 per cent of debt in 2015-16 to 60 per cent in 2017-18, and was forecast to fall to 47 per cent three years after that.

He said the rates increase could have been under inflation if it were not for for the legacy inherited from the previous council. Legacy issues included leakage in the civic block, allowing the IT system to run down and stormwater funding.

The new council last year pushed through a $5 million stormwater levy, which increased rates by 4.7 per cent per cent. The levy reduces to $3.4 million for 2015-16 and $2.3 million for every year after that.

Quizzed about the growing debt, Mayor Stuart Crosby said his election pledge was that it would stay at below the council's self-imposed limit of 250 per cent. One of the key reasons debt was projected to drop was the arrangement with the NZTA to take over Route K's debt.

He said that one of the council's financial parameters was to not allow debt to exceed $500 million. He said the long-term plan forecast debt would reach $495 million in 2021, driven by construction of the Waiari water supply scheme near Te Puke.

Barring events beyond the council's control, he said the plan was very accurate for the first three years, after which it would be reviewed again.

Cr Robson told the meeting that they were in an interesting place rather than a good place. He said the city's economy was not on a firm foundation, with growth driven largely by people fleeing Auckland.

He said the council was made up of a bunch of people who had shown a significant ambition to operate as a board.

Mr Crosby said the council was in a good space. "We are going well." Deputy mayor Kelvin Clout called it a progressive budget.

Cr Steve Morris said he would vote for the plan, although he did not agree with everything, like the Tropical Display House that will cost ratepayers $1 million over the 10 years.

Cr Matt Cowley said compromises had eased the rate of change he wanted to implement, saying he intended to follow through with big reviews on some "very hefty topics".