The rate peg limit set for 2017/18 will make it hard to put a budget together, said Dubbo Regional Council administrator Michael Kneipp.
The rate peg for the next financial year has been set by the Independent Pricing and Regulatory Tribunal at 1.5 per cent.
The rate peg determines the maximum amount NSW councils can collect in rates, as well as some annual user charges such as stormwater, waste, water and sewerage.
“For this year the rate peg was 1.8 per cent, so to go down to 1.5 per cent it will make it hard to put a budget together. We will have a balanced budget but it will be hard to do so,” Mr Kneipp said.
There could be some works which would have the be delayed, he said.
“If you compare it with local government rate rises in Victoria, our rates are minuscule.
“The average person on the street would say the cost of living is going up more than 1.5 per cent.”
Councils wishing to apply for special rate variation need to notify IPART by December 9. At this stage, Mr Kneipp said it would be considered, but unlikely for Dubbo Regional Council to apply.
The administrator said he appreciated the strong financial position of the two former councils, as well as the $5 million from the NSW government for the merger costs and the $10 million towards infrastructure projects through the Stronger Communities Major Projects Fund.
IPART said the low rate peg was due to the modest rate of public sector wages growth in recent years and low inflation, which has seen the cost of some of the items used by councils fall, like fuel and telecommunication services.
The low rate peg has been slammed by Local Government NSW (LGNSW).
LGNSW president Keith Rhoades said the 1.5 per cent rate peg was part of a financial noose which continued to tighten around councils, preventing financial sustainability.
The rate peg has continued to go down since it was set as 3.4 per cent in 2013, and Cr Rhoades said it prevented councils from addressing the infrastructure renewal backlog.
"The reality is that rates have not kept pace with the cost of services and infrastructure that local government is expected to deliver," he said.
The rate peg limit is set by measuring changes in the Local Government Cost Index, which includes average costs faced by councils.