Local councils have accused the NSW government of treating them like "debt collectors", amid warnings plans to end its Emergency Services Levy subsidy will force them to slash services.
The levy, which funds agencies like the Rural Fire Service, is mostly paid for as part of insurance premiums.
But the state government and councils contribute 14.7 and 11.7 per cent respectively.
The new Labor Government said the subsidy — introduced by the previous government to help councils pay their share — was "ad-hoc", "not budgeted for" and would not be continued.
Local Government New South Wales said the changes would send 2023-24 council budgets — which were subject to a rate cap of 3.7 per cent — into "meltdown".
The change means an extra $77 million will need to be found collectively by 128 councils.
"The ESL is an absolutely blatant cost shift by the state government," LGNSW president Darriea Turley said in a statement.
New rates revenue 'wiped out'
Hay Shire Council general manager David Webb said the increase would "wipe out" almost all the extra funds generated from the council's planned rate rise.
"Our total extra rate income from the rate peg is $100,000, so it's 88 per cent of our rate increase which is going to be taken up by the increase in the emergency services levy here in Hay," he said.
"For a one-off it's OK, you can always handle a one-off like that.
"But where does it go from here? What happens next year?"
Mr Webb said the levy was the responsibility of the state government.
"I think it's the state government's remit to provide those services and the state government should be funding those services," he said.
"It just makes it difficult when [rate increase revenue] does get all but wiped out just by cost-shifting from the state government that we have no control of."
On the NSW Mid North Coast, Nambucca Valley Mayor Rhonda Hoban was shocked to find out her council was being asked to pay $650,000 — a 50 per cent increase on its previous contribution.
She said it meant the council would need to make tough decisions to balance the books.
"We either have to look at staffing levels, reducing services or not undertaking an infrastructure project" Cr Hoban said.
'Very disappointing'
Tenterfield Mayor Bronwyn Petrie said she was fed up with the council being forced to act as a "debt collector" for emergency services funding.
"They are effectively collecting this from ratepayers, not necessarily all of the community," she said.
"Which is why that cost should come out of Treasury and be collected in a different way."
Cr Petrie said the shire's new rate increase was demolished by the change.
"By removing the subsidy we are actually going to lose more money than we are going to collect through rates with that rate peg," she said.
"So that means we have less than we have now to cover increased costs in the next 12 months — it's very disappointing."
Funding laws have not changed: NSW government
A state government spokesperson disputed claims emergency services funding was a state government responsibility.
"Emergency services agencies have long been funded through the cost sharing arrangement," they said, in a statement.
"The contributions made by local councils to emergency services are determined through legislative requirements.
"These legislative requirements have not changed."
The spokesperson said the subsidy was approved by the former government and the new government "did not have the time to engage with the process without jeopardising the funding arrangements for emergency services".
"The NSW government recognises that councils are facing increased cost pressures and is focused on ensuring the sustainability of the local government sector."
