An inner-city council's plan to hit its residents with a new "bin tax" has prompted Local Government Minister Natalie Hutchins to call in Victoria's essential services watchdog.
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Yarra Council wants to introduce a $247 waste charge. The rates increase would hit all property owners with a rubbish bin.
Many Victorian councils already have a similar charge.
But Yarra is the first to try introducing such a measure since the Andrews government brought in a cap on councils raising rates above inflation.
If the new waste charge means the council will exceed the rate increase councils are allowed to charge residents, Yarra will be blocked from introducing the measure.
"Budgets must reflect community expectations and the views of their residents," Ms Hutchins said.
Councils must apply to the Essential Services Commission if they want to exceed a rate cap of 2 per cent. Yarra has until the end of May to lodge its application.
The council has not yet set its final budget plan, and is consulting with residents until early next month.
Yarra Council has four Greens councillors, all of whom supported the bin tax. Socialist councillor Stephen Jolly opposed it, and has launched a public campaign against the plan.
"The council has never been richer, and if it wants to cut costs, it should start at the top - we are the most over-bureaucratised council in Melbourne," he said.
The council expects to post a surplus of $9 million this financial year, and $15 million next year if it can include the bin charge.
Because of the boom of apartment development in Yarra's suburbs, which include Fitzroy, Richmond and Abbotsford, the council predicts its rates and charges intake next financial year will grow from $101 million to almost $114 million.
