Rate surplus boosts council limit control

Tauranga City Council's $3.2 million rates surplus could be used to help keep the council within its new self-imposed limit on rate increases.

The cap on rate increases takes effect for the first time next year and was based on the consumer price index (CPI) plus 2 per cent.

However, council budget forecasts for 2013-14 show a 5 per cent rate increase for an average Tauranga property valued at $422,000. Based on current CPI trends, this will be 2 per cent higher than the rates cap.

The council has opted to postpone making a decision on the surplus ahead of the 2013-14 financial year.

Financial controller Paul Davidson said the council could then make an informed decision around how to apply the surplus.

The original $3.7 million surplus has reduced to $3.2 million because of the rule to put $500,000 of any surplus into reducing debt.

Mr Davidson said the first draft budget for 2013-14 would be put to the council in late November or early December, followed by a series of meetings and workshops stretching into early next year.

In the interim, the interest being earned on the cash balance in the rating account was reducing the interest bills on debt. He said the council used $1.7 million of the previous rates surplus to reduce rates. The rest was used to lower debt and boost the risk management reserve.

Mr Davidson said the money had to be used to lower debt and reduce rates - the risk management reserve was effectively reducing debt.

The council collected $99.7 million for the financial year ending June 30, and spent $96 million. The savings were caused largely by the impact of lower than expected interest rates. A bonus was the unbudgeted penalties received from people who did not pay their rates on time.