Cowra Shire Council, and 85 other NSW Councils, have been given the green light to raise their rates above the annual rate peg.
In December last year, the Independent Pricing and Regulatory Tribunal announced that the council could raise its rates by 0.7 per cent, but Cowra - and many other local government areas - argued that the rise was insufficient.
The 0.7 per cent increase was the lowest granted in two decades.
In April the council applied for an exemption to increase rates beyond 0.7 per cent and this week IPART approved that additional special variation, allowing Cowra Shire Council to bring rates up by 2.5 per cent.
Michael Jones, Director - Corporate Services said in April a one-off reduction of 1.7% (2.4% - 0.7%) would have a compounded effect of $1.2m over 10 years.
"For a small regional Council, this has a material impact on operations and services that Council provides," Mr Jones said.
"The issue is there is a methodology (used by IPART) which is flawed," Cowra mayor Bill West said last month.
"Rate pegging puts local government behind the eight ball because we don't get sufficient funds with the rate pegging the way it is to maintain the services that our community is entitled to or expects to be provided.
"I'm not saying we're going backwards but we're struggling every year to make ends meet simply because rate pegging provides such an impost," he said.
In March Cowra Shire Councillor Ruth Fagan described the setting of the rate peg at 0.7 per cent as a "kick in the guts".
"We've never had to do this before. This is a rare thing for us, we've always abided by the rules," Cr Fagan said.
"By putting out a 0.7 per cent increase its made us feel like we've done the wrong thing. It's not a good look and in the future everyone is going to look like they've had to apply for a special variation.
"We have been living within our means with very responsible budgets and this is a real kick in the guts for us.
"I'm very annoyed with the IPART recommendation. We shouldn't have to do this, it is against everything we have done in the past and I am annoyed we have to go cap in hand for something we really deserve," she said.
Local Government NSW (LGNSW) President Darriea Turley said the special rate variations, which were given to 86 NSW Councils acknowledged the dire financial situation created by its initial decision to cap rate rises at 0.7%.
The 0.7% cap - the lowest baseline rate cap in more than two decades - was handed down in the face of surging inflation, soaring fuel and commodity prices, and the need to repair extensive damage caused by the Black Summer bushfires and the recent floods.
"It is important to recognise that councils would have been held to this historic low rate cap without the intervention and insistence of Local Government Minister Wendy Tuckerman" Cr Turley said.
"Without this, many councils would have been forced to choose between cuts to jobs or roads maintenance, parks, libraries and other community infrastructure and services.
"So while we strongly welcome the announcement, we remain deeply concerned that such an anomaly can be produced by IPART in the first place."
Cr Turley said the special rate variations were still extremely modest, coming in at around half the current inflation rate and one third of the Reserve Bank's predictions of 7% inflation by December.
"Councils are the closest level of government to the community, and we know firsthand that individuals and local businesses in our communities are doing it tough.
"That's the very reason why we all agreed to share that burden and keep rate rises as low as possible.
"Responsible budgeting meant we were and are prepared to share the burden on our communities - but that burden should not include the prospect of cutting jobs, services and spending on infrastructure critical for our local economies.
"The simple fact that more than three-quarters of the state's councils were forced to seek a special rate variation shows the methodology used by the Tribunal to calculate the rate cap is irretrievably broken.
"It is clearly no longer fit for purpose, so I would urge both the State Government and the IPART to make sure the upcoming review comes back with a system that works.
"IPART has confirmed it will review its own rate cap methodology following a reference from the State Government.
"Today's rate variation approvals mean that councils can get back to the core business of delivering the services and critical infrastructure communities and economies need.
"IPART needs to do the same, and that means reviewing and replacing the current defective methodology with something better."
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