Residents in Yass, Murrumbateman and Sutton are facing a 76 per cent increase in their rates, following a Yass Valley Council decision to take the measure to public consultation.
The motion passed 5-4 after the council called an extraordinary meeting on Wednesday to address its financial issues.
Independent consultants have found the council would need to generate an extra $8.3 million from operations each year by 2027-28 to maintain its financial and infrastructure position.
The council has put a special rate variation to the community for feedback. (ABC News)
The motion means the council will spend six weeks in community consultation, taking three financial options to the public.
All three would result in a cumulative 76 per cent increase in rates, but the different models would stage the increases differently over the four years.
Mayor Jasmin Jones stressed this did not mean council had decided to approve the rate hike.
"It was a decision to go out to our community for the next six weeks to put our boots on the ground, to get that really robust feedback from our community," she said.
Mayor says 'structural problem' with NSW council funding
Ultimately the council would also need the special rate variation to be approved by the NSW Independent Pricing and Regulatory Tribunal.
Speaking to 666 ABC Canberra, Cr Jones agreed 76 per cent sounded like "a lot".
"But that is the structural financial correction that is happening across New South Wales right now," she said.
"Yass Valley Council is certainly not alone in the need to go for a special rate variation at least once every 10 years."
Yass Valley Council mayor Jasmin Jones has defended its financial management. (ABC News: Simon Beardsell)
She pushed back against suggestions the council had mismanaged its finances.
"I think it's fair to say that if every rural council is going for a special rate variation every 10 years, that tells you that there's a structural problem in how councils are funded," she said.
"Our rate peg only allows us to put up rates every year — for example, 3.4 per cent or 3.7 or 3.9 — when the cost of materials skyrocketed, for example, during the diesel crisis."
Asked about the decision to invest in a new council building, which has drawn some ire in the community, Cr Jones said it had been necessary.
"The workplace wasn't fit for purpose — we had people's chairs actually falling through the floor, it was beyond redeeming that particular building,"
she said.
Cr Jones also conceded they were struggling to keep up with roads maintenance.
"I can totally accept that in terms of roads, that when we say we're going to come and grade that road three times a year and we're struggling to do even once, that they'd be dissatisfied," she said.
The extraordinary meeting led to a vote to put the three financial options to the public. (ABC News: Simon Beardsell)
'There's not a lot that we can do'
The near three-hour meeting was passionate at times with members of the public having their say.
Malcolm Bamford, who lives in the council area, said he did not feel confident after leaving the meeting.
"The decision had to be made, OK, but the biggest concern ... was how are they going to do it?" he said.
"They've got an increase before, and then we've another one, nothing really came out of it that makes you confident.
"If we need the money, there's not a lot that we can do.
"We've got to get out of the trouble that we're in."
Yass Valley Council chief executive Gayleen Burley said it was an "emotive" issue for people struggling to keep up with costs.
"We have compassionate debt recovery services," she said.
"But also we want to engage early with our residents, so that if there is an issue with meeting the demand for an increase in rates, that they're able to engage with council and we can come to a workable solution."
Yass Valley Council chief executive Gayleen Burley says compassionate financial assistance is available. (ABC News: Simon Beardsell)
Renters urged to have their say too
The issue of financial sustainability in local government is not new, and a federal inquiry into their viability is currently underway.
In 2024, the Australian Local Government Association (ALGA) called for a greater cut of federal tax revenue.
In November last year, the Yass Valley Council deferred a vote on a rate increase of between 40 and 58 per cent.
Cr Jones urged all residents to have their say on the proposal.
She said the variation would not apply to services such as rubbish collection, water or sewerage.
"And I just want to emphasise that everyone can have a say, you don't need to be receiving a rates bill to have a say on this.
"So if you're a renter, we still need to hear from you because these are costs that get passed on to you.
"We need to hear from community and sporting organisations, young people, families, older residents across not just Yass and Murrumbateman, but also our villages."