Tauranga residents have been warned they may face big rate rises if the city cannot find new ways to pay for its rapid growth.

Photo: RNZ / Andrew McRae

Mayor Tenby Powell said the days of borrowing to pay for the needs of the country's fastest growing city were over.

Speaking at a media briefing at the Tauranga City Council offices on Friday afternoon, he said the city was quickly reaching a crucial point and a new funding model was needed for growing cities like his.

He said it was up to the council to meet the challenges head on.

Debt the council could carry was restricted to two-and-a-half times its annual revenue and essential capital project commitments meant that limit would be breached in the next few years if action was not taken.

Powell urged people not to panic, however.

''Tauranga is not broke, we are not broke, but we just recognise with the growth forecasts we need to do something different than which has been done before.''

He said the city needed bold leadership.

''Opening the hood as we are today I think is the beginning of a process of significant change for the city and I will say - and this is from my perspective - that this is not about caretaker leadership and more, it is about bold leadership to take the city forward.''

Powell said had rate rises been managed better over the last few years the city would not be in its current position.

He did not rule out rate rises or asset sales, but says they were just two options.

''We have two water plants which are extremely expensive, we have got an airport, there are a range of options we could look at. Personally - and I haven't talked to my colleagues about this, but my personal view is - I am not a fan of selling the family jewels.''

Deputy mayor Larry Baldock believed most residents would be pleased the council was facing up to its growing pains.

He said to do nothing simply was not an option.

''We have to provide certain things, water is crucial - coming out the taps, dealing with our waste water - those things are not options.

"We have to go forward, we have to pay for things, what the rates are going to have to be to do that on their own of course is impossible."

''We have to find other solutions and I think we will,'' he said.

Recently elected councillor Dawn Kiddie said councillors were facing some hard decisions.

''I can only but surmise what raterpayers' reaction will be, being one myself. This is all about community engagement, this is us going out there and speaking to the ratepayers and realistically we have to be able to know what is facing us and what the options are out there.''

Councillor Steve Morris said the council could not just put up rates to solve the problem.

''I think we need to show leadership and advocate to central government, tell them - what they already know, by the way, through the work of the Productivity Commission report - that the rating system is no longer fit for purpose for large cities in New Zealand.

"We can't rate our way out of it. You cannot invoice property owners as the sole or predominant measure of collecting revenue. It doesn't work.''

Ngāi Te Rangi is one of three iwi in Tauranga Moana and its chair Charlie Tawhiao said most people had seen the crisis coming as growth has far outstripped the city's ability to afford it.

''What presents as a problem for council presents as a potential opportunity for long-term infrastructure investors like iwi,'' he said.

Tauranga City Council was set to meet on Tuesday, 3 March to thrash out its options.