Cessnock City Council's bid for a rate rise has been denied by the state's independent pricing regulator as a neighbouring council's request won approval.
The Independent Pricing and Regulatory Tribunal (IPART) handed down its final report on Tuesday, ruling that Cessnock City Council could only increase its general income by the standard rate peg of 3.8 per cent in 2026-27.
That mark is a far cry from the 39.9 per cent permanent special variation the council had sought.
The council voted to proceed with its plans to apply for the rate rise in January after a tense and extended debate in the chamber.
Had it been approved by IPART, the increase would have added $600 a year to the average residential rates bill, rising from $1,503 to $2,103.
Business ratepayers would have faced an average jump of more than $2,000, while farmers would have been hit with an additional $1,374 annually.
The council had argued the dramatic increase was needed to stabilise its finances, address a growing infrastructure maintenance backlog, and maintain services in the face of rising costs and rapid population growth.
The additional revenue would have raised roughly $22 million in extra annual income.
The regulator found Cessnock Council failed to adequately justify the massive increase or properly consult its community.
Among IPART's criticisms was the council's community consultation process, which the tribunal found left ratepayers inadequately informed about both the scale of the proposed increase and what the money would actually be used for.
Key documents were not made publicly available until after the primary survey window had already closed on 17 November 2025.
IPART also found the council's survey was designed in a way that may have steered respondents toward supporting the increase, with some questions framed around expert authority and moral considerations rather than offering neutral options.
More than 90 per cent of the 668 people who responded to IPART's own feedback process said they believed the council had not effectively managed its budget, while 89 per cent disagreed with the size of the proposed increase.
A separate petition opposing the rate rise attracted 740 signatures.
The tribunal criticised the council for failing to seriously explore alternatives to a single-year, near-40 per cent jump, such as phasing increases over several years or pursuing greater developer contributions from the area's rapidly expanding residential developments.
"A more comprehensive assessment of credible alternatives, including clear reasons for their feasibility or rejection, would have strengthened the case for why a large, immediate increase is necessary," the report found.
"This is reinforced by stakeholder feedback which indicated that some members of the community may have supported a smaller or gradual increase."
IPART's analysis of affordability painted a difficult picture for Cessnock ratepayers.
The Cessnock local government area ranks 17th out of 128 NSW councils on an index of relative disadvantage, meaning the community faces significantly higher levels of socio-economic hardship than most of the state.
Had the increase been approved, Cessnock's average residential rates would have exceeded those of all comparable nearby councils, including Singleton, Hawkesbury and Port Stephens, and would have sat well above councils with similar disadvantage profiles such as Lithgow and Clarence Valley.
The tribunal also noted the council's outstanding rates ratio had been trending upward over the past five years indicating a sign that a growing number of ratepayers were already struggling to keep up with their bills.
Cessnock City Council acknowledged the decision on Tuesday and indicated it had been preparing for this outcome.
"As a council, we have been actively preparing for any outcome on our application for a special variation of rates," Cessnock mayor Dan Watton said.
"We have a draft operational plan for 2026/27 for this scenario currently on exhibition, which was endorsed at our May meeting."
The council warned, however, that the rejection did not make its financial problems disappear.
"The IPART determination in itself does not resolve the serious financial challenges we face as a council, and financial sustainability remains a top priority for our council going forward. We will continue to communicate with the community as we progress our ongoing financial sustainability journey."
The council also expressed frustration with how the decision was announced.
It said IPART's report and media release were made public hours earlier than the regulator had indicated they would be, and before the council had even received its own copy.
"Council is currently reviewing the contents of the report and media release, which were publicly released hours earlier than IPART stated they would be in a meeting yesterday, and before we received a copy," the spokesperson said.
IPART approved nine other applications from NSW councils to increase their general income by more than the rate peg, and two applications for a minimum rate increase.
While IPART rejected the application by Cessnock City Council, neighbouring Muswellbrook Shire Council's application for a permanent variation of 29 per cent in 2026-27 was approved.
The council proposed applying this increase to mining ratepayers only.
This permanent increase represents an average 49 per cent rise for mining assessments, made up of the 25.9 per cent approved rise on top of the 3.1 per cent rate peg.
The council says it will generate approximately $6 million in additional revenue for the shire in 2026-27.
Increases would be in line with the rate peg for all other ratepayers.
Muswellbrook raises approximately 56 per cent of its rate revenue from mining operations.
It said without this action, mine closures threaten a $5 million annual revenue loss in the near term, ballooning to $18 million by 2044-45.
Mayor Jeff Drayton said Tuesday's decision was proof of the council's ongoing commitment to getting ahead of the challenge, not waiting for it to arrive.
"We have been working hard behind the scenes to make sure our community does not carry the financial burden of mine closures," Mayor Drayton said.
"Council is in a strong financial position but with coal mines starting to close in 2030 this decision means we can continue to provide the level of service our community expects.
"More importantly, it allows us to invest in economic diversification - attracting new industries and sustaining jobs for the long term.
"Coal has been the backbone of our community for generations and will remain part of who we are.
"But we owe it to our community to plan for what comes next - and that's exactly what we are doing."
