The renewal of Shellharbour City Council's Warilla Child Care Centre lease at the current peppercorn rate is under review by the NSW government.
Minister for Family and Community Services Gabrielle Upton had sent a letter to Shellharbour MP Anna Watson advising her "matters raised concerning the Warilla Child Care Centre are currently under review", a FACS spokeswoman said.
Ms Watson contacted the minister earlier in July, asking her to urge the state government to continue the lease at $1 a year.
The council has rented the property at that rate for 38 years, but a decision by Housing NSW to increase the lease to $40,000 from 2015 has put the centre's future in doubt.
The council will decide on September 2 whether to uphold a recommendation the centre be closed if an alternative provider cannot be found by October.
Parents with children at the centre are distressed over the potential closure, concerned they will be unable to find other arrangements that suit their families' needs.