The Central Otago District Council has set that upper limit in its long-term plan consultation document, which is likely to be adopted at the council meeting tomorrow.
The draft estimates and fees and charges are among the topics on the agenda and council corporate services manager Susan Finlay has recommended the reports and draft document be approved.
If the council signs off the document, it will be open for submissions until May 11.
In the document, Mrs Finlay notes the proposed 5% increase would be an average across the district and rate increases would vary depending on property valuations and where land was located.
Targeted rates are assessed on a ward basis.
The big challenge was to balance the community's ability to pay with the need to maintain infrastructure and deliver services, she said.
Improving drinking water supplies and wastewater systems would be a significant cost for ratepayers in the next decade.
The council would have to borrow to pay for new infrastructure projects and repay those debts through rates over 35 years.
Many communities in Central Otago were facing major upgrades to comply with drinking water standards or address water quality issues.
Tighter regional and national controls on discharging wastewater meant the council was also faced with costly upgrades of its existing wastewater systems.
Finding an improved water source for Alexandra with lower lime scale levels was set down for the next financial year, while Omakau's drinking water upgrade was proposed to take place in 2017 and Naseby's was set down for 2019-21.
Cromwell's wastewater upgrade was scheduled for 2016-21 and the council would have to consider a wastewater treatment plant for Clyde, with the aim of completing that project in just over a decade.
How those upgrades would be funded was still being finalised. Under the current targeted rates model, it was difficult for small towns in particular to afford water or wastewater upgrades.
That issue prompted the council to look at a district-wide strategy.
The current system meant all those connected to a town water supply scheme funded the scheme through a targeted water rate.
Water metering and charges for the volume of water used above a certain level were in addition to that water rate.
Ratepayers will be asked their views on two potential funding options. Water metering would continue to apply under both options.
One was a partially subsidised model, where each water scheme was primarily funded by the ratepayers connected to it, but the amount they had to pay was capped at an agreed level.
Any ''excess'' costs above that level would be funded by council-owned town water supply users throughout the district.
The second option was a fully subsidised model, where all water schemes would be funded equally by all ratepayers across the district who were connected to council water schemes.
That would spread the costs across the district and all users would pay an average cost. District roading was the most expensive activity carried out by the council
Of the 175 bridges on the council roading network, 65 were expected to either reach the end of their economic life or need significant renewal work within the next 30 years.
The community would have to decide whether it could continue to fund maintenance on all the existing roading assets or whether some should be privately funded, the document said.
