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Chief executive Rob Phillips said the plan could not, post Covid and flooding, stay as it was when planning began last year.
"There is no doubt this is going to be a challenging year for Southland and the rest of the world. In this period of recovery council is committed to retaining a thriving Southland for people who live, work and visit here."
The annual plan is forecasting a deficit of $2.7million and sets the overall rates increase at 4.9%, which is below the 5.9% forecast in the Long-term Plan 018-28.
Chairman Nicol Horrell said the council was conscious that post-Covid, money was short, but said it needed to balance jobs it was asked to do.
Cr Lloyd Esler called it a compromise between "wanting everything" and how much they could ask for from ratepayers without "too much pain".
"The outcome is probably the best we could get in the circumstances."
While it was hoped council would work to a balanced budget by 2024-25, Cr Peter McDonald suggested that "assumption" needed to be revisited.
"This rate may not align with the community’s expectations, but what does set us apart is that we have to have those reserves for the unknowns, which was the flooding events."
An example ratepayer with a house in Invercargill worth $235,000 would pay $16 more next year, based on an overall rate increase of 4.9%.
Changes in valuation relativities are likely to affect many properties.
This coming year people can pay their rates in three instalments without penalty, via direct debit. More details on this will be available when the rates are struck in September.
The Annual Plan 2020-21 is available on the Environment Southland website www.es.govt.nz