Wagga ratepayers are losing out on $300,000 per year because the council does not own the airport's land, according to NSW Labor Senator Deborah O'Neill.
Visiting Wagga on Monday, Senator O'Neill said Riverina MP Michael McCormack should intervene in the matter to save ratepayers' money and encourage new business investment at the airport.
According to the Civil Aviation Safety Authority,Wagga Airport is owned by the Department of Defence, with a section leased to Wagga City Council on a 30-year agreement that expires in 2025.
"Here is a situation where the Defence Force is getting paid (by) the local ratepayers," Senator O'Neill said.
"The Defence Force is a very large, very well-funded entity of the Australian government and the (money) charged every year to ratepayers would be far better spent in this community."
Senator O'Neil said Mr McCormack, as Deputy Prime Minister, should be able to help the council to come up with an alternative arrangement.
"It's not good enough for Mr McCormack to tell people to write him a letter; that's an insult," she said.
Mr McCormack said Wagga's airport and the Royal Australian Air Force were "intrinsically attached" and he had worked hard to support aviation and the military in the region.
"The airport is not at a disadvantage under its current arrangements," Mr McCormack said.
"The airport has seen a number of private sector investments, including Regional Express and its engineering base and hangars.
"The federal government is investing in new equipment to upgrade the terminal under a $50 million program to enhance security at regional airports."
Wagga council general manager Peter Thompson said the council had been in "positive" and "continuing" discussions with Mr McCormack and Defence.
"Council is hopeful that the current negotiations will pave the way for a new approach to the airport tenure for the benefit of the community," he said.
"This approach involves a request to depart from the agreement which was entered into by Council and the Commonwealth Government approximately 20 years ago. Council is grateful for the positive and supporting negotiations to date and looks forward to a good outcome."