Slashed by more than one per cent on last year’s figure, the 2.6 per cent cap has been described by Great Lakes Council general manager Keith O’Leary as “a real blow.”

He said the 2010-2011 draft budget [yet to be handed down] had been framed with the expectation that the government would keep the cap at around 3.5 per cent, as it has teetered around for the last four years.

“It’s very disappointing quite honestly and very disappointing for local government in general I think.”

He said the move has forced council to consider a deficit budget this year.

Minister for Local Government Barbara Perry was unapologetic for the reduction that she said was calculated by examining a range of economic factors, predominantly inflation.

“Inflation has been down and the rate peg reflects this,” she said.

“Rate pegging ensures councils receive a moderate rate income increase in line with changes in the economy.”

But the Local Government Association of NSW has rejected the cut, claiming communities across NSW will be at risk of losing vital services and facilities.

“While it might be in line with current CPI, it’s simply not enough to cover our escalating expenses, including a $6 million infrastructure backlog,” president of the Local Government Association Cr Genia McCaffery said.

“We already have to deal with an inadequate share of taxation and a cost shifting bill that totals $400 million every year – we can’t keep fighting with one hand tied behind our back.”

A press release from the minister’s office said councils could apply for a “special rate variation” which would allow them to lift their income above the rate peg.

Mr O’Leary said that wasn’t an option for Great Lakes, which will be consulting with the community to incline rates over time as part of the 2020 plan.

The annual rate cap was announced earlier this year than previous to “allow councils more time to speak with their communities about their plans and projects for the coming year,” Ms Perry said.