Bath and North East Somerset Council (Banes) has paid a senior manager more than £1.2m over the past five years, audit figures have revealed.
John Betty, strategic director for development and major projects, leads initiatives including the rebuilding of schools and the completion of Bath Spa.
The council defended the bill claiming it had to pay large sums of money to get the best people.
The coalition government described the deal as "exorbitant".
Mr Betty's company, of which he is the director and sole employee, was contracted by Banes in 2005 to provide the services of a strategic director and he has had his contract extended for another three years.
He had previously worked in construction and ran major projects at Westminster City Council.
Other projects he leads at Banes include the stabilisation of Combe Down mines and the Bath Western Riverside development.
He was also in charge of the later stages of the Bath Spa development, which cost more than three times the original estimate when it opened in 2006.
Figures published in Banes annual statement of accounts show Mr Betty has been paid between £224,533 and £304,425 per year since 2005.
In 2009-10 he received £258,196, however the council can claim back VAT on payments to him.
In January this year his contract was extended until 2013 at a similar rate.
In February Banes announced 76 job cuts to try and make 5% savings, and the government has warned councils to expect 25% funding cuts in the next few years.
Chris Howe from Unison South West criticised the pay offer.
He said: "We find it incredible that the decision makers within Banes council have decided to carry on paying this individual roughly £187,000 a year for the next three years, bearing in mind what he does in terms of development and project work."
BBC Somerset asked to speak to Mr Betty but the council said he was unavailable for comment.
In a statement, it added: "The levels of pay received by all members of the senior management team appropriately recognise their skills and capabilities."
Mr Betty earned £40,000 more than the council's chief executive in the financial year 2009-10 and at least £100,000 more than other strategic directors.
Because he is paid through his own company, the council does not give him a pension, sick pay, holiday pay or flexible working allowance.
The council said its management of major projects since Mr Betty started had been "exemplar".
Conservative MP for North East Somerset, Jacob Rees-Mogg, said Mr Betty had saved the council more money than he cost as he recouped £7m through an out-of-court settlement with the builders and architect of Bath Spa.
He said: "We are in an age of austerity and councils have to be very careful, but when you put it against £7m of savings, it's not as bad as it sounds."
But Local Government Minister Grant Shapps said: "The Audit Commission has warned that these exorbitant pay deals haven't been matched by improvements in performance.
"The new government is taking action to tackle town hall chiefs pay."