The council moved to apply to the NSW Independent Pricing and Regulatory Tribunal (IPART) for a permanent Special Rate Variation (SRV) at its ordinary January meeting on Wednesday.

But they eventually went with an option of increasing rates by 10.5 per cent, rather than 20.5 per cent.

Council's manager of financial services Kelly Stidworthy, recommended Option 1 be adopted - an SRV application of 18.5 percent plus 2 percent rate peg (a total of 20.5 percent) commencing in the 2021-22 financial year.

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"This provides council the greatest opportunity to secure its long term financial sustainability while at the same time seeking to review and improve its own service level commitments to enhance community outcomes," Ms Stidworthy said in her report.

"It would also enable council to meet the requirements of the Performance Improvement Order issued to Council on 9 December 2020 by the Hon. Shelley Hancock MP, Minister for Local Government."

Ms Stidworthy said this rate percentage increase (including the 2 percent rate peg) would result in the average Armidale residential ratepayer paying an additional $2.48 per week and the average Guyra residential ratepayer paying an additional $1.16 per week.

"This Special Rate Variation option will address Armidale Regional Council's financial sustainability and maintain essential community infrastructure including council's road network, footpaths and community buildings," she said.

However, after a heated debate council agreed to a motion proposed by Cr O'Connor six for and one against - rejecting Ms Stidworthy's recommendation.

Cr O'Connor moved that Option 2 be adopted (to apply to IPART to replace the loss of the current SRV of 10.5 percent) rather than Option 1.

"Both in the areas of primary production and the residential area we are in a state of extreme fragility," Cr O'Connor said.

"I would like to just drop the SRV altogether, but I know we can't because our assets are so degraded and that would mean switching off the lights and shutting up shop.

"We can't go to IPART with Option 1 with the results we received from the community consultation, so we only have one option. We have to get our house in order."

Cr Robinson seconded the motion and said the council's job was to represent the community's views.

"If they do not want a 20.5 per cent rise then we have to listen," she said

"I am opposed to Option 1 because I believe the community opposes it.

"Instead we need to call out the powers that be on cost-shifting because more and more costs are being put onto local government and it is not fair.

"I see more innovative ways of applying for grant funding, and we need to work with other levels of government to ensure our community gets a fair go."

Cr Peter Bailey said he actively supported option 2

"We've got to get to a stage where we live within our budget," he said.

"We've got to find a way to make the cuts and if that means we only mow the lawns every three weeks then fine.

"When the community complain, we can say we only went for Option 2 because we have to make the appropriate cuts."

Cr Tiley spoke against the motion and in favour of Option 1.

"Option 1 gives the council the best opportunity to achieve its aims, but even Option 1 does not get the council to the level of some of the Office of Local Government's benchmarks," he said.

"Continuation of the temporary SRV does not address future growth and the asset renewal backlog placing a financial burden on future generations.

"Furthermore council would have limited options to fund new assets as the region grows. I accept that there is little support for Option 1, but deferring the inevitable should not be countenanced.

"Sometimes, in local government, decisions are not popular, and this is one such occasion.

"Real leadership sometimes involves taking the road less popular."

Ms Stidworthy said no matter what the decision council will need to clearly demonstrate to the community what they are spending the money on.

Three speakers addressed council against the proposed rate rise, and a group of protestors chanted outside the chambers throughout the meeting.

Inside the chambers, during the public forum, former councillor Rob Richardson supported Option 2 while both Josh and Leo Fittler spoke against any SRV rate increase - Option 3. All three speakers claimed the council's community consultation process was flawed.

Former council candidate Joshua Fittler has been initiating protests on social media since the SRV application was proposed late last year.

Upon hearing the council's decision, Mr Fittler said he was not impressed.

"We need less fat cats sitting on top of our council on a quarter of a million dollars each," he said.

"The time for polite discussions has long gone when lower-income families have to reconsider which town they call home."

Armidale's local government has been operating on an income provided by a special rate variation (SRV) for nearly two decades, and in November last year, Ms Stidworthy said it would be unable to continue to provide the current level of services and asset renewal unless a rate increase of 20.5 percent was approved and implemented this year.

The other options proposed were to either replace the loss of the current SRV of 10.5 percent to maintain council services in the short term (but increase the backlog of asset renewal) or cease the rate variation and cut back on council services and infrastructure maintenance.