Palmerston North City Council has approved the draft 2020/21 Annual Budget increase of 1.95 per cent after significant changes to its first draft.

An earlier 4.4 per cent increase was dropped following further reductions in operating costs.

The increase in total rates collected is recommended to be 1.95 per cent after further reductions of $550,000 in its operating expenses were incorporated following the Council of Committee meeting on May 20.

The percentage increase for each property will vary; examples indicate increases between 0.8 per cent and 1.3 per cent for residential rates, and 2.5 per cent to 3.1 per cent for non-residential rates.

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Council is set to adopt the Annual Budget on June 24.

Once adopted, it will be available on the council's website and at council offices for viewing.

Ratepayers will also then be able to check online what their 2020/21 annual rates charge for each property will be.

PNCC chief executive Heather Shotter said during the finalisation of the draft budget, the council had to consider the projected reduction in non-rates revenue from venues and facilities, parking and the Palmerston North Airport dividend.

"In delivering significant savings, we have worked through our budgeting process to maximise efficiencies, and continue to deliver key services without weakening our ability to meet community needs, particularly at a time when many are experiencing impacts from the pandemic."

The council's first draft budget went out for public consultation before the Covid-19 lockdown with a growth-targeted proposed 4.4 per cent increase, which was less than the 5.2 per cent projection in the 10 Year Plan.

After the economic impact of the pandemic and hearing public submissions, council requested a revised budget with a reduction in operating expenses to ensure the proposed rate increase was 1.95 per cent.

Mayor Grant Smith said the council valued the submissions people made during the consultation period, which was during a very challenging time for everyone.

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"This budget takes into account the extraordinary economic and social impacts of the pandemic with a reassessment of the assumptions about costs, revenue and the availability of external resources to deliver our services and programmes.

"It's pleasing we have been able to deliver a considerably lower increase than was previously projected.

"Any increase lower than 1.95 per cent would threaten our ability to provide the current level of city services and derail opportunities for growth as a leading regional city.

"While the real economic impact of the pandemic is unknown, Palmerston North is in a stronger position than many of our peers.

"We had economic momentum ahead of the international crisis, and we have the resilience of a diverse economy that is strong in less-impacted sectors.

"The city has several significant infrastructure projects under way or in the pipeline, and it's essential we can invest in and service major projects to stimulate economic recovery, employment and welfare.

"We will continue with our catalyst projects that shape our city to become New Zealand's leading regional city while retaining our small city benefits."