Tauranga City Councillors are juggling a range of factors as they attempt to restart the city's growth economy.

A previous policy of ‘growth pays for growth' has had to be abandoned in the face of diminished growth and millions of dollars in development contribution shortfalls.

Ratepayers are expected to make up the difference – how much is still under review.

The council revisited the issues this week as part of the Ten Year Plan deliberations, following on from discussion in August and workshops with developers.

The shortfall is now calculated at $20.1 million, down from the earlier estimate of $26m.

The shortfall is because of reduced cost estimates for Papamoa roading projects including Mangatawa interchange, Sandhurst Drive and the Tara Road upgrade.

Because further fluctuations in the shortfall amount are likely, council staff are recommending it is not transferred to rate funding until the amount is determined.

This would result in the staged transfer of the shortfall to rates over the 2012-22 Ten Year Plan period.

The initial calculation of the shortfall in growth funding to-date, relating to all areas/activities except the transportation activity in Papamoa and Bethlehem and the

stormwater activity in Papamoa, was $13.2m.

It has now been recalculated at $9.9m.

This amount includes $4.5m associated with the building impact fees (BIF) of community infrastructure activity; libraries, community centres, reserves.

Due to decisions made through the development of the draft 2012-22 Ten Year Plan this shortfall is likely to disappear.

In August, councillors decided against increasing west Bethlehem subdivision impact fees (SIF) to get full cost recovery on the amount the council has already spent on infrastructure; roads, and piping for water and sewerage.

The SIFs instead will be reduced for the next five years to promote development in the west Bethlehem area.

As a result of the August decisions, council staff have calculated that $6.35m of growth funding is required to be transferred to rate funding.

The council has a range of responses which Mayor Stuart Crosby says are still a work in progress.

'We have agreed to include cost of capital in our projections,” says Stuart.

'It just means that we include interest in the projects.”

The council is also looking at deferring building consent payments for developers – under conditions.

'At the end of the day both of those will be at no cost to the council,” says Stuart.

'There is an interest payment included if a builder or developer wishes to uplift that opportunity.

'Basically what's happened is the recession has certainly created the need for the developers and council to work together because both have a substantial investment in infrastructure in the ground. So it's to everyone's benefit including the ratepayer that we do work together.”

The council is also looking at changing how contribution charges are levied.

Council sets its charges so they should remain largely constant in dollar terms over the entire life of an urban growth area (SIF) or over the entire period of a planning period (BIF).

This means the contribution amount payable for a development today in Wairakei at Papamoa east would be largely the same as the contribution amount payable in 30 years time for the same development.

Because the value of money changes significantly over time, this leads to the situation where, in terms of purchasing power, developers today are paying significantly more than developers in the future will.

Council staff view the situation as manageable provided growth predictions are accurate.

The big risk, especially in relation to the Southern Pipeline, is that future growth is significantly lower than forecast.

'I think you have to look at the Southern Pipeline over a long period,” says Stuart. 'That's an asset that will be used for up to 100 years.

'It was always predicted that will have a slow start and our challenge is how we manage the early years of those assets that will have a long lifetime.

'One of our difficulties is the law that we work under.

'On some assets we can only look 10 years ahead.

'Here we are putting in an asset with a lifespan of 80-100 years, but we are only legally allowed to collect development contributions on some assets not all of them, over a 10 year period – so those are the mix of issues that we are working our way through.”

The fate of a $2.2 million surplus in rates will be decided at the end of the process, says Stuart.

Their options are to use it to lower next year's rating requirement, to pay off debt or to put it aside for emergencies.

'My view is that we should spread it among all three in a mixture,” says Stuart.

'I think we should use some of it to smooth out the rating requirement particularly over the next two years.”

Policy requires debt repayment of at least $500,000.

The surplus is a mixture of strong collection of rates and a reduction in operational costs, and some interest savings over the year, says Stuart.

'We target to have a balanced budget.

'The year before we were within $200,000 and this year there's a surplus of $2.2m.

'It's better to be on that side of the ledger than the other.

'Bearing in mind we started this year off with a $500,000 deficit because of the insurance increases as a result of the Christchurch earthquakes.

'So there's always different dynamics that alter during the year.”