Tauranga commissioners have reluctantly agreed to an increase in residential and commercial rates but say the city is “going backwards” by not matching or bettering inflation - and they have signalled higher rates in the future.

The decision and comments were made at a Tauranga City Council meeting today at which commissioners set the rates for 2023/24.

Commissioners agreed to a median increase to residential rates of 7.2 per cent, including water rates, and 18 per cent for commercial rates, excluding water rates.

For residential ratepayers, the median increase, excluding water rates, is 9.4 per cent.

Commissioner Stephen Selwood said this year’s rates were constrained by what had been set out in the Long-term Plan. While these increases were “the right thing to do”, the city could be paying in other ways if they were not increased more significantly in the future, he said.

“It’s important to note that these actually lose us ground in terms of our inflation rates running well above that 7 per cent, particularly for infrastructure,” Selwood said.

“We can’t afford to keep these rates low,” he said.

Tauranga City Commissioner Stephen Selwood. Photo / Andrew Warner

Selwood said there was already obvious pressure with the cost-of-living crisis and “hopefully, the decision and rates today will be seen by the community as council’s acknowledgement of that”.

 “But I think we have to acknowledge ... our rates increase is less than the rate of inflation we are facing.

“Not funding the necessary investment, we [will] end up paying in other ways across the city.”

Commission chairwoman Anne Tolley agreed.

“The reality is that this is probably less than inflation in what’s going to be a very difficult year for everyone, for everyone,” she said.

“We are going backwards.

Commission chairwoman Anne Tolley has concerns the new rates increase isn't enough. Photo / Alex Cairns

“You just have to look at BVL [Bay Venues Limited] and the legacy of underinvestment of not paying in the short term but creating that bell wave ahead of you. It’s a considerable chunk to cough up.”

Earlier in the meeting, Bay Venues appealed to the commissioners for $5 million more in funding.

The money was agreed to as part of an Intra-Group Two-Way Loan Agreement between the council and Bay Venues, which has already allowed $30m.

A 2021 review of Bay Venues found its current business model, with the then-existing level of council contribution, was not sustainable.

A report presented to the meeting stated the original expectation of Bay Venues was that it would be commercially profitable and increasingly offset the cost of running the council’s community facilities but this had proved “to be unrealistic and unsustainable” over the past 10 years.

Tolley said of the rates increase that it was “the right thing to do this year” but it would “make it tough in ongoing years”.

“I do think we need to acknowledge that.”