A Tauranga City councillor's claims that next year's rates are going to be 10 per cent higher to cover the bow wave created by a $43.5 million storm water works programme were quickly refuted yesterday by Mayor Stuart Crosby.

Tauranga City councillor Catherine Stewart reminded her fellow councillors of the financial bow wave the works programme is creating for future rates bills, saying it will result in a 10 per cent rates increase next year.

But Stuart quickly shut her down, asking where she is plucking 10 per cent out of the air from – and reminded her that three years ago, claims of a rates increase of 18 per cent also never happened.

Stuart says Tauranga City Council's rates increase next year will be kept within the Rick Curach-inspired rates cap of two per cent, plus inflation and growth.

During the recent Tauranga City Council annual plan deliberation process, the storm water costs projection was eight per cent on the rates, says Stuart.

'But it's a theoretical number – it will not be the reality. The reality will be a lot lower and it will be within our rates cap policy,” says Stuart.

The council has again managed to produce a budget surplus, which Stuart attributes to good treasury management and lower operating costs.

Half of the $4.2 million surplus will go towards debt reduction, and the ‘council of the day' will determine what to do with the balance.

But Stuart is quite confident the new council will do what was done last time, and lower the rating requirement.

'Generally, one per cent is just under $1 million, that's two to three per cent off already. Then we go through the budget ourselves and make decisions that will bring the final number within the self-imposed rating cap,” says Stuart.

This year will be the third-in-a-row in which the council has managed to stay within its self-imposed rating cap.

'I think this current council has been very good in difficult financial times to stay within our self-imposed rates cap, of local government inflation plus two per cent,” says Stuart.

He admits that Catherine Stewart is technically right, but says the eight per cent is a projection and it will not be the real number.

'We've always started with the higher number and cut our cloth to fit within the rates cap.”

TCC financial controller Paul Davidson says the $4.2 million rates surplus this year has been created by the council collecting $103.7 million from ratepayers but spending $99.5 million.

Operating revenue is $170 million against a budget of $165 million. Interest accounts for the majority of the increase, due largely to lower spending on capital projects which have been carried forward or re-budgeted to later years.

Operational spending was $170 million, up $5.2 million or three per cent greater than budget.

Paul says depreciation, personnel and finance costs are under budget, while other expenses – like asset write-offs and impairment, and payment to council-controlled organisation Tauranga City Aquatics Ltd for the balance of its depreciation reserve – exceed budget.

Capital expenditure for the year was $40 million against a budget of $66 million, after adjusting for carry forwards. This is considerably lower than last year with $15 million being carried forward and southern pipeline costs being re-budgeted.

'We've put our house in order,” says Deputy Mayor David Stewart.

'We've had to grapple with some huge financial changes over the last three years and this is a very good result.”

'We are not out of the woods yet,” says Bill Faulkner. 'If we keep focusing on core functions we will get on top of things. That should have been done years ago.”