The council in Conception Bay South says it had no choice but to raise the fee that homeowners must pay for water services in the expanding town.
The town's $30.7-million budget for 2014 was approved Tuesday night.
Deputy Mayor Steve Tessier said the town has been able to freeze property taxes for the coming year, but needed to raise revenue to cover the cost of providing water and sewer.
"The most significant contributing factors in developing the 2014 budget was the loss of the municipal operating grant and continued escalating costs of purchasing water," Tessier said.
The water and sewer tax rate is up by $65 per household, from $475 to $540.
The town noted that it was able to purchase its water from the regional water authority in 2005 for $421,000. Next year, that cost will be about $2.1 million.
Mayor Ken McDonald said the cut to the municipal operating grant was covered through internal savings.