The rate increase will add $38 to the average household rates bill, which will rise to $728.

The rate hike is almost twice as much as last year's, but is less than the state average of 7.5 per cent.

Ballarat Mayor David Vendy said the council had abandoned its original CPI rates target (three per cent) to enable extra projects to be included in the budget.

And residents can expect rates to rise further after Ballarat City Council unveiled its four-year financial plan yesterday with provisions for a 26 per cent rate increase over four years.

Waste charges will also increase by $10 next year to $115.

The $90 million 2005/06 budget includes a record $30 million for capital projects - 20 per cent more than this year - and is based on Blueprint Ballarat.

City of Ballarat chief executive officer Richard Hancock said the council had managed to boost capital spending and still keep rates below the state average by freezing council debt repayments and through

a combined $1.8 million plus windfall from the sale of the Central Square car park and a reserved surplus.

"Council and I have worked really hard at trying to keep rate increases to a minimum but at the same time achieving the levels of capital works that we genuinely believe Ballarat's asset now needs,"

Mr Hancock said.

Finance Cr Geoff Hayes said the city had done well to achieve a rate increase two per cent below the state average.

"On balance I think there's a split across the community between CPI and maybe the 10, 11 per cent (increase)," he said.

"You pay for what you get.

"I think Richard and the organisation have been able to develop efficiencies that were not previously here and those efficiencies meant that we can do more for a lesser increase than two years ago."

Almost $40 million (44 per cent) of council's budget is derived from rates.

Fees, charges and fines raise $21 million, while State and Federal Governments contribute $19 million.

The Ballarat City Council budget will be on public exhibition for the next two weeks, before being adopted by the council on July 13.