The NSW government's bungled council merger policy is set to cost a Sydney council $200 million in lost revenue over the next decade, leaving ratepayers facing potential rate hikes and a decline in services, as the council struggles to keep its books in the black.

After banking over $14 million in surplus last financial year, Hornsby council's financial position is projected to plummet to a $1.7 million surplus this year, as a result of the botched merger with Ku-ring-gai council.

Hornsby mayor Steve Russell says he has fallen out with members of the party over his stance on council mergers.

Over the next decade, the council is now projected to bank surpluses averaging just $1.4 million each year if the merger does not proceed, according to a revised long-term financial plan prepared by the council's chief financial officer Glen Magus.

The major financial decline is a bitter twist for the council, which was one of the most effusive backers of the government's merger policy, and agreed to surrender key assets and a revenue stream in the redistribution of core economic territory to the new City of Parramatta Council.