Tauranga City Council debt figures are looking healthier than expected in the financial report for the seven months ending January 2014.

The council is continuing to be better than budget for both operating expenditure and revenue, which are both up 2 per cent, according to the latest report.

Capital expenditure is still below budget with 31 per cent of the annual programme spent, council's Finance and Risk Committee was told yesterday.

The net surplus to the end of January is $2.9 million. This is expected to reduce with seasonal spending by year-end, plus anticipated increased interest costs as the capital expenditure programme is progressed.

Not all the surplus is rate funded. The rate funded year end surplus is about $1.5 million.

The surplus has come from increased revenue from user fees, interest and dividends, and about $1.2 million in development contributions. At the same time operating expenditure is $1.8 million under budget and capital expenditure is $6 million underspent.

Key variances relate to New Zealand Transport Agency revenue, which is due to the timing of the subsidised works and will be close to budget by year end. Other variances relate to interest received due to the timing of the borrowing and expenditure programmes and the amount of investments on hand at any one time.

Net interest is lower than budget due to the timing of the capital expenditure programme. Water by metre is slightly ahead of budget to the end of January.

The key indicators are the rates revenue of $62.2 million, the yearly $105.5 million budget and the take is $0.7 million ahead of budget. Operating surplus $2.9 million.

Net debt is $382.5 million, with budgeted debt for the full year being $409.4 million. The debt to revenue ratio is at 230 per cent - 14 per cent better than expected, with the ratio at year end expected to be 230 per cent.

After peaking at $450 million in November 2013, actual gross external debt has remained at about $400 million for the last two months.