An order that Broken Hill City Council pay $7 million to a mining company for overpaid rates was in the spotlight this week as a NSW parliamentary inquiry into state-wide land valuations began hearings.

Head of the inquiry, state MP Matt Kean, told a media conference in Broken Hill on Wednesday the NSW Valuer-General did not include more than $200 million worth of infrastructure in its valuation of zinc, lead and silver miner Perilya’s site.

Last year the Land and Environment Court ruled the mine was worth $5 million, less than one-quarter the Valuer-General’s $21 million valuation.

The Valuer-General is appealing the court decision, which has had a huge impact on the city council’s rates income. The council wants the state government to refund the rates money it will have to repay to Perilya.

Perilya lodged an objection to the land valuation in early 2011, information that was not passed onto the council until late last year.

The council, which was already in financial difficulty, has had to cut planned projects and consider further actions to repay the money to Perilya.

The annual St Patrick’s Race Day, the biggest tourist event of the local calendar, was the first hit with a retraction of the $10,000 annual donation.

The council has also considered a one-off doubling of rate payments to cover the debt, a move that is allowed in NSW but not popular among rate-payers.

As council reduces funding to local projects and support of local events, businesses hit with higher rates will be unable to make up the difference and many local events and organisations may suffer as a result.