Tauranga ratepayers have been asked to pay $1.7 million to bail out the council from unsustainable loans for the Pyes Pa Bypass and the purchase of a 170-hectare farm in Papamoa East.
The city council yesterday acted to stop the spiralling interest costs on the two loans, which were compounding each year because the interest was being rolled into the original loans.
By coincidence, both loans started out at $10 million, with the Papamoa property purchase taking place a year before the 2008 global credit crunch crippled development. The council agreed to hold the debt on the Bell Rd farm at $15 million in order to stop it ballooning out by a further $1 million in a year's time.
Depending on the outcome of a property consultant's report due in March, the council could end up spending an additional $600,000 this year to begin reducing the debt on the Carrus/Hickson block.
The purchase was forced on the Tauranga and Western Bay councils to stop an unwanted 48-lot rural subdivision from going ahead. The councils secured rights over the land for 10 years in order to buy time until the 20,000 population satellite city of Te Tumu was ready to be developed.