Three council projects and $85,000 worth of drainage and road maintenance have been "reluctantly" cut from council's 2014-15 budget in response to a likely $253,000 hit from the federal government.
The funding shortfall has been caused by the government's decision to freeze indexation of Financial Assistance Grants to local government.
Repairing a disabled access ramp at Winmalee Neighbourhood Centre ($57,000), replacing pit toilets in parks and reserves ($90,000) and upgrading the power supply to Katoomba's Kingsford Smith Memorial Park ($20,000) will all be deferred.
Other projects to be deferred include a boardwalk around Wentworth Falls Lake, a footpath at Railway Parade in Woodford, a new car park at the Mid Mountains Community Centre and refurbishment of the Lawson Rural Fire Service building.
Council also noted the financial impact of a 21 per cent increase to the state government's waste levy which amounts to a $2.9 million impost on Blue Mountains residents and businesses in 2014-15.
And it resolved to write to Minister for the Environment Rob Stokes regarding that "being a poor use of taxpayer dollars relative to other critical priorities and risks needing to be addressed within the city."
Councillors gave their support for the council budget changes while expressing their frustration at "hits" on council by the state and federal governments.
Clr Brendan Luchetti said council keeps "getting whacked, hampering its ability to deliver services to the community.
"[Deferring] things like the ramp at WNC - these are the things people take notice of and it's not good enough," he said.
Clr Romola Hollywood said producing a balanced cash budget was "a very difficult process for us because we've had to look at what projects to put on hold - I've even shed a tear".
"Yet there is some good news . . . we do have some great infrastructure that has really come on board like the Cultural Centre [in Katoomba] and we've also got the Springwood cultural and civic centre [due to open in 2015]."
Clr Chris Van der Kley said as a councillor for 15 years he'd "watched governments of different persuasions and they all seem to want to target us".
"The waste levy is a prime example - when it came in 2004 we paid $4 million.
"It's a very big impost on this council and we get slugged again."
Clr Mick Fell called the waste levy increase "an absolute ball-and-chain on local government" while mayor Mark Greenhill said it was "a money grab".
"We are taxed for doing the right thing, for keeping our waste in our city," Clr Greenhill said.
"It's taken courage to have the responsibility to balance the council budget."