Plans are progressing to create a new Greater Linconlshire Authority.
The Government has offered a funding package of £450m over the next 30 years - the equivalent of £15m every year.
However, the deal is dependent on the 10 local authorities involved accepting a mayor.
In an exclusive interview, Mr Farage described creating a mayor as a ‘complete waste of money.’
He said: “I travel the country and I’ve yet to see a system involving a mayor actually work.
“It creates another layer of government - another layer of decision making.
“What is wrong with local people making decisions?
“If you asked people in Lincolnshire, no-one would want a mayor and no-one needs a mayor.
“Yes, the Government is offering £15m a - which is not a lot of money for such a large county - but is saying you must have a mayor.
“No mayor - no money.That’s blackmail.”
The 10 local authorities involved have already signed an initial agreement supporting the new venture.
East Lindsey District Council will debate the proposals at an extraordinary meeting tomorrow (Thursday).
Council leader Coun Craig Leyland says he also has ‘misgivings’ about the position of a mayor.
Coun Leyland said: “I can understand the benefits of a combined authority but there is still some way to go before any agreement is in place.
“A number of issues have to be sorted out and one of them is the mayor.
“I just hope the mayor would not have a lavish office - and lavish support staff - at a time when we are having to save £6m over four years - and make some very difficult decisions.”
There are conflicting reports about how much the introduction of a mayor would cost.
It’s not clear whether it would be a paid position. Figures for Greater Manchester show the office of mayor cost £900,000 over five years.
Under the proposals for Lincolnshire, the mayor would sit at the head of a cabinet involving the leaders of the other authorities involved.
Coun Leyland stressed the £15m funding could not be used to prop up the finances of those authorities and said it was unclear what would happen if any councils opted out of the new Greater Lincolnshire Authority.
The new ‘super’ authority - which would not replace the county or district councils - could be up a running next May.
There are claims it could generate £8billion and create 29,000 jobs.
The public will be consulted on the proposals.