However, residents could see a double discount as Wagga council is also due to end its special rate variation for the flood levee in the next financial year.

The Independent Pricing and Regulatory Tribunal (IPART) has announced that NSW councils can increase the revenue they can collect from rates by a maximum of 2.0 per cent in 2021-22, down from 2.6 per cent previously.

"It's a $269,000 hit to our bottom line over our long-term financial plan," Cr Conkey said.

"It's certainly disappointing in light of the fact that we have got COVID-19 and we have taken a pretty substantial hit because of that.

"We're looking at over a $4 million deficit, just in COVID alone and we have got a backlog of maintenance, which is quite substantial, so we would need to have a serious look at what services we would need to cut."

Wagga council raised rates to the maximum 2.6 per cent in its current budget, which was forecast to bring in a total of $70.9 million out of nearly $203 million in ongoing revenue.

IPART tribunal member Deborah Cope said the body had recognised that councils face higher costs for their 2021 local government elections when setting the new rate peg.

"The [0.2 per cent] adjustment will be reversed through the 2022-23 rate peg, to ensure that ratepayers are not overcharged in subsequent, non-election years," she said.

Ms Cope said the lower rates peg for next year was "a positive outcome for NSW ratepayers".

Cr Conkey said Wagga council would also lose $100,000 in revenue because the NSW government had banned charging interest on unpaid rates balances during the pandemic.

"The cost shifting to local government is $3.5 million from our bottom line each year that the state government pushes onto us," he said.

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The tribunal's rate peg was based on "moderate price inflation" in the Local Government Cost Index.

Temora Shire mayor Rick Firman said the Riverina Eastern Regional Organisation of Councils had previously met with IPART to argue that their calculations did not include all the extra costs.

"We have got to be grateful for [the 2.0 per cent] and the community has experienced some tough times, particularly in COVID," he said.

"On the other side of the coin, all of the councils' costs are still present and there is not a lot of respite for councils.

"From our council's perspective, if we don't include the maximum allowable rates peg in our budget, we will never catch up on costs."

NSW councils will be able to decide whether increase general income by the rate peg, less than the rate peg, or not at all.

"The rate peg applies to each council's general income in total, not to individual ratepayers' rates," an IPART statement said.

"Individual ratepayers' rates are also impacted by land values set by the Valuer General NSW."