Cr Steve Morris said the flooding was the result of a backlog of stormwater work put off by previous councils.
"But it is up to us to fix it and I congratulate this council for being brave enough to do so."
Cr Gail McIntosh said the decision would not be popular but it had to be made.
City to buy flood-hit homes at cost of $3.4m
The $5 million approved yesterday is on top of the $5.5 million allocated for stormwater improvement works in the Mount Maunganui industrial area.
In total, $3.4 million would be set aside to allow the council to purchase flood-prone properties in areas such as Matua and Otumoetai and complete stormwater projects, members decided yesterday.
Stormwater modelling would use up $1.2 million and the remainder would go towards stormwater works in the industrial estate.
Confidential negotiations for potential property purchases started after the decision was made.
It is understood the majority of property owners are from the Matua peninsula.
None of the residents at council wanted to be be named but each had horror stories that included raw sewage in homes as the result of flooding.
One man told the Bay of Plenty Times he had water "up to the light switches" a number of times after heavy rain.
"We are hoping council will purchase our property so we can get on with our lives.
"We have been living in hell because past councils have not spent enough on stormwater infrastructure in the past."
Another man said he and his wife had lived on their property for more than 30 years.
They did not want to move but had been told it would cost far more to stop the flooding.
"Right now we are just working through the options but it's nice to know council is serious about helping us.
"Some people might not like the levy but, if they were in our situation, I wouldn't think twice about paying a $100 or so in extra rates to help out a fellow human being."
During yesterday's meeting, Mayor Stuart Crosby warned the city's stormwater bill could be upwards of $200 million.
"This is just one cog in the wheel of the issue," he said.