The cap on upcoming rate increases will see Wollongong City Council "treading water", according to Lord Mayor Gordon Bradbery.
While Shellharbour Mayor Chris Homer said its increased cap will allow it to better deliver on services like parks, footpaths and libraries.
The Independent Pricing and Regulatory Tribunal this week released the rate pegs for the 2024-25 financial year for all NSW councils.
The rate peg represents the maximum amount a council is allowed to increase its overall rates revenue - which is distinct from any rise in individual rates.
Shellharbour's rate peg was set at 6.2 per cent - the fifth highest in the state - while Wollongong's rose from the current 3.7 per cent to 5 per cent.
Kiama Municipal Council's is 4.5 per cent, down on the 2023-24 peg of 5.1 per cent.
With Wollongong's rate peg over the last two financial years being 1 per cent and 3.7 per cent, Cr Bradbery said the upcoming 5 per cent peg will see it playing "catch up".
"Inflation got away on us and so 5 per cent will bring us part of the way but we'll still have to seriously look at how we manage this one," Cr Bradbery said.
He also said it would be up to the council to decide whether to accept the rate peg or ask for a one-off rise to avoid the possibility of "treading water" in terms of infrastructure delivery.
"We're in a period of economic challenges right across the board especially in terms of the cost of living so we're very mindful of its implications for our residents," Cr Bradbery said of any request for a rise in the cap.
"We get most of our income from rates, fees and charges. Being able to deliver the services and meet the expectations of the community is just becoming more and more challenging if we stay within the rate peg.
"It will be subject to a lot of discussion as to how we can manage to keep within the rate peg and the possibility of special rate variation will no doubt be on the agenda as well."
Cr Homer said the council was under increased pressure due to the rise in construction costs and felt the 6.2 per cent peg would make it easier to both upgrade existing infrastructure and build new ones.
He said the rising costs meant that projects planned in advance have had the rule run over them again to make sure they were still affordable.
"Even in recent playground renewals and master plans made six months previously or a year previously have had to had fresh eyes cast over them," Cr Homer said.
"I would have to assume it's pretty similar in my neighbouring councils
"it's just an area where things have to be looked at and we have to somehow meet our funding obligations and work with what we've got."
He said that the council had been "trying to make $1 work like $2" and that any possible rate rise that may result from the 6.2 peg would be forced on the council.
"It's just that the current inflationary environment that we're in is forcing our hands ...if we're to continue delivering tangible public amenity - which is what local government does," he said.
"Everyone likes the new sports ground and the active transport paths and other public amenities and promenades but at the end of the day we're the level of government that's tasked with putting in these public amenities."
Kiama Mayor Neil Reilly wasn't surprised with its 4.5 per cent peg but felt more work needed to be done on how IPART calculated them. This was despite IPART revising its methodology after an outcry from councils over recent rate pegs.
"My feeling is that it was as we had expected it to be. it certainly in line with the consumer price index and it also takes in a little bit of the inflation problems that we have at the moment," Cr Reilly said.
"I'm not disappointed with it but by the same token we have had a fair bit of input to the modelling of the IPART situation and we have to consider that the IPART scenario with the settings is a broken system and it really needs to be addressed properly.
"I don't think they have got it right. It's too much of a blanket formula, that needs to be somehow or other tweaked
"I think that we the council need to have some kind of input into it during its formulation. We don't want to set it but we want to have a little bit of input."
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