Rotorua District Council debt is expected to peak at almost $210 million before the end of the decade.
Rotorua District Council committee heads are comfortable with debt projections but remain cautious, saying if projections don't work out, ratepayers may have to live with the loss of major projects planned for the future.
Council chief executive Peter Guerin said projected debt would reach $209 million by the end of the 2018 financial year reducing to $183 million by the end of 2022.
Councillors were briefed on the city's debt situation at an extraordinary meeting of the corporate and customer services committee as part of draft Long Term Plan deliberations. Mr Guerin said an earlier forecast of almost $200 million of debt by 2022 had been reduced to $183 million.
Corporate and customer services committee chairwoman Janet Wepa said next year's Annual Plan process would pick up any oversights after adoption of the Long Term Plan on June 29.
"I'm very pleased it's [debt] down from the almost $200m we were originally told about and our rates increase will stay at a 2.9 per cent average.
"To keep Rotorua moving forward is a real balancing act - next year we will have a much better idea of where our economy is heading," she said.
Economic and regulatory services committee chairman Mike McVicker said that considering the tough economic landscape the council had come up with prudent levels of debt.
"But we have to be cautious ... this is all subject to forecast revenue and in some areas, such as tourism and building, we have seen some major declines."
Mr McVicker said the next one to three years would be crucial.
Infrastructure services committee chairwoman Glenys Searancke said the proposed debt levels were manageable, provided council was financially prudent.
"We can't let debt spiral any higher ... Plan B could see some major capital projects, like the Lakefront redevelopment not going ahead, and cuts to our levels of service."
Mrs Wepa and Mr McVicker were both concerned about the amount budgeted for development contributions, saying the council had not managed to achieve past forecasts. Mr Guerin said that by the end of the Long Term Plan in 2022, forecast debt of $183 million would largely comprise $89 million for general rating activity capital, $47 million for the Rotorua Airport, $25 million for self funding reserves and $79 million in development contributions.
"Forecasts show debt declining in each of the last five years of the Long Term Plan and we would anticipate debt will continue to decline after that through the council's debt and treasury management policies," he said.
Current district council debt sits at $150 million, $56.6 million for the Rotorua Airport upgrade.
Mayor Kevin Winters said Rotorua sat in the middle when compared with other councils' debt levels.
"Ratepayers can rest assured that the council's debt levels are entirely reasonable for a district our size and and a council that is in sound financial health.
"We have more than a billion dollars of assets to back our borrowing and our debt levels are also well within maximums set in policy ... we have access to funds at relatively low interest rates as we are viewed by financial institutions as being in good financial health. This is another reason to use borrowing for major capital projects."
He said debt should not always be seen as a negative term.
"Borrowing ... will service a community over a number of future generations. That means we don't have to burden our current generation with paying for everything up front - the cost is shared with future users."
Mr Winters said the council had listened carefully to submitters during recent deliberations and as a result had trimmed another $20 million off earlier proposed debt levels for 2022.
Past debt levels:
- 2002: $43 million
- 2004: $53 million
- 2006: $62 million
- 2008: $83 million
- 2010: $116 million
- 2012: $150 million
- 2014: $173 million
- 2016: $191 million
- 2018: $209 million
- 2020: $202 million
- 2022: $183 million