A change in funding for Tauranga’s civic precinct Te Manawataki o Te Papa could save ratepayers $1 million a year in interest.

The $306 million precinct in the city centre will include a library and community hub, civic whare - public meeting house, exhibition gallery and museum.

The commission applied to fund the $151.5m ratepayer portion of the project through an Infrastructure Funding and Financing levy.

The levy proposal was rejected by Housing Minister Chris Bishop in June because he said it was important the incoming council had their say on it.

Now the council will apply to the Local Government Financing Agency - LGFA -  to fund the $151.5m.

The LGFA provides a lower interest rate than an IFF levy, which would enable $1m yearly interest savings.

Borrowing through the LGFA was possible because the Government and funding agency are looking at increasing the debt limits, potentially up to 350% of revenue, for high-growth councils.

Mayor Mahé Drysdale said the new LGFA funding was a "very good solution". Photo: Alisha Evans, SunLive.

At a Tauranga City Council meeting on Monday, mayor Mahé Drysdale said using the Local Government Financing Agency was cheaper and provided more transparency than the levy because the debt was on the council’s books.

He said he was “very uncomfortable” with the levy because ratepayers could have been locked into a higher fixed rate for the next 30 years.

The need for an IFF levy was “forced” on the commission because of the lack of head room with the council debt limit, he said.

Drysdale said the LGFA funding was a “very good solution”.

“It’s going to be cheaper and ultimately we’ll save our ratepayers money over time.”

Drysdale said the council had an important role in investing in and revitalising the CBD.

There were significant risks to ratepayers if the council decided to pause or change the project, including losing $50m invested in the precinct build if it was stopped, he said.

There was over $1 billion in private investment in the CBD as the council’s desire to reinvigorate the area had given them confidence, Drysdale said.

Councillor Rick Curach wanted to delay the project to consult with the community. Photo: David Hall, SunLive.

Councillor Rick Curach said he didn’t want to cancel the project, but he wanted to delay it subject to community consultation, and definitive answers from project partners to make a responsible decision based on community views.

Curach said it was largely a “vanity project” and he didn’t buy into the value of it.

He said he wasn’t convinced of the cost to delay or cancel the project and raised concerns about the affordability of it for ratepayers.

Councillor Rod Taylor said there was the potential for reputational damage if the council altered or stopped the project.

This could be from their iwi partners, council staff who had worked on the project for years and from the private developers investing in the CBD, he said.

“What would it say about us if we stopped this project?”

Tauranga Deputy Mayor Jen Scoular. Photo: David Hall, SunLive.

Deputy Mayor Jen Scoular said the council needed to make sure it was adding value for the people of Tauranga.

“Are we progressing a project which they have been consulted on and … there has been very positive feedback about?”

Te Manawataki o Te Papa was consulted on in 2022, with 72 per cent of respondents wanting the full precinct to be built.

Drysdale said there was an opportunity cost and money spent on a project couldn’t be spent elsewhere.

“As we go forward it is important that we understand that, and we are prioritising the projects that we need in order to deliver for our people.

“I am confident that the project as it stands right now at about $306 million is currently on time and on budget.”

The remaining $154.5m for the precinct would be funded from grants, development contributions and selling surplus council assets.

LDR is local body journalism co-funded by RNZ and NZ On Air.