Wollongong City Council has rejected a NSW government proposal that could add an average $320 to household rates bills.
Councillors at Monday night's meeting were told the government was reviewing the way in which funds were collected to pay for fire and emergency services.
At present the bulk of the funding - 73.7 per cent - comes from a tax on insurance companies, with councils (11.7 per cent) and the state government (14.6 per cent) making up the remainder.
The NSW government proposal is to replace this three-tiered approach with an emergency services levy on all ratepayers in the state.
The plan was rejected by the council on Monday night.
Cr David Brown said that under the move, ratepayers would think the council rather than the state government was raising rates.
"We've rejected that because council would be asked to collect it," Cr Brown said.
"It's something we don't want to do, because we'll be seen to be collecting something like $320 per household - that would be the average extra cost.
"We don't want to be seen to be collecting this massive increase in money and then handing it over to the state government to pay for their employees."
Cr Brown said the levy could be as much as a quarter or a third of people's rates, but that wasn't the council's only objection.
"If you look at what those services do, the fire and the rescue, it's not just linked to people's home ownership," he said.
"Clearly if you're in a natural disaster somewhere and need rescuing that's got nothing to do with whether you do or don't own a home.
"They provide a vital service to the community and the state government should be funding it."
There was also the concern that insurance companies could not be forced to reduce their fees by the amount of the levy, raising the possibility that people could effectively be slugged twice.
Cr Brown suggested the government should consider other ways in which fire and emergency services could be funded.
"It's a discussion paper from the state government, I assume that they've entered into it in good faith and are seeking community feedback and council feedback," he said.
"If they get a whole range of negative feedback I'd hope that they go away and have another look at it and see if they can come up with a better idea."