Last year IPART announced it was linking the rates peg, or the maximum amount council's could increase the overall rates charged, to population growth. This meant Orange City Council was restricted to an increase of 0.7 per cent, compared to the usual hike of around 2.5 per cent.

However, Local Government Minister Wendy Tuckerman this week cleared the way for a special one-off rate variation for planned infrastructure and community services, capped at 2.5 per cent.

Orange City Council CEO David Waddell welcomed the minister's intervention saying he would be briefing councillors on their options at Tuesday's meeting.

"I will be encouraging the council to go for the full variation of 2.5 per cent," Mr Waddell said.

"This is welcome news [from the Minister] and will spare us some real budget pain."

Mr Waddell said OCC had budgetted for a 2.5 per cent increase in its forward planning.

Local Government NSW President Darriea Turley said the unexpectedly low 0.7 per cent baseline had forced councils to look at recasting their budgets, scrapping planned infrastructure projects and consider service and job cuts.

"The announcement came as a massive kick in the guts to councils already working so hard to help their communities recover from the events of the past two years," Cr Turley said.

OCC Finance Policy Committee Chair Cr Kevin Duffy said he wasn't surprised by the minister's intervention.

"I have no problem with that but it needs to be a council decision and I'd imagine it will be one of the first items on the council agenda. I'm not saying if I support it or not but it does seem extremely low the 0.7 per cent, it seems unrealistic."

Council applications for the special one-off variation will close on April 29, with decisions expected from IPART by June 21 this year.

"Our councils recognise that individual families and small businesses are also doing it tough, and there is certainly no appetite to exacerbate the pressures they face," Cr Turley said.

"The opportunity to increase rates by up to 2.5 per cent is still less than inflation, but it is in line with what councils expected when they finalised their budget, work planning and community consultation process last year."

Minister Tuckerman said IPART had also been tasked with undertaking a broader review of its rate peg methodology, including the Local Government Cost Index, to prevent a reoccurrence of what she described as the 2022-23 anomaly.

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