With $30.5 million put aside for capital works across the shire, the operational budget is forecast to move $2.9 million into the red in the next financial year.

It can be a juggling act at times but the council is financially healthy, mayor Andrew Hope said.

"The $30 million for capital works is predominantly for the water treatment project at Quipolly Dam," he said.

"It's a major drought-proofing project and will upgrade a water system built in 1930, it's state-of-the-art and will last us well into the future."

The ongoing drought has made water at the dam difficult to treat, a new system will make that process much simpler and more effective.

A number of projects were identified in the budget that the council would like to investigate but doesn't have the funds to deliver.

Those included the Quirindi and Werris Creek Roads rail overpass, the south Werris Creek Gap Road realignment, a heritage study of Mystery and Werris Creek Roads and access roads to the Werris Creek intermodal rail hub.

Residents face a 2.7 per cent rate hike, earning the council $7.4 million in the next financial year.

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It's a necessary evil to meet community expectations of services, Mr Hope said.

"We're not different from any other council where our rate peg travels behind expenses, ours doesn't even cover the cost of the increase in wages for the year," he said.

"Cost-shifting from the state and federal government has had a huge impact, the Emergency Services Levy cost us an extra $80,000 extra that we hadn't budgeted for.

"It makes it hard for small councils to balance their books."

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