He told the Examiner this week the council was experiencing some financial pressure, but the perception the council was going broke was 'totally false'.

Mr Gesling laid most of the blame for the council's cash flow problems on a state government imposed 2.6 per cent rate cap which was 'grossly inadequate'.

He said the council's recent financial woes, which include a 2009 deficit of $10 million, current debt of about $50 million, investment losses of about $6 million and a recent application to extend its overdraft by $1.2 million, did not mean there was a cash crisis.

"Council is feeling some financial pressure, but there is certainly no crisis," he told the Examiner.

"Our cash flow issue is totally unrelated to our bottom line and is not causing council any real concern."

To hande the shortfall Mr Gesling said a number of projects would need to be shelved until July.

"Some of the bigger projects include work on the Birubi Surf club and road work on Adelaide Street, Raymond Terrace and Tarean Road, Karuah," he said.

Mr Gesling said applying for an overdraft increase was the right thing to do despite an attached interest rate of more than 10 per cent.

"Council believes the level of debt is totally appropriate," he said.

"It should be noted that a significant portion of this figure is as a result of our loan, as 50 per cent owner of Newcastle Airport.

"Of the remainder.. most is used to fund other income generating sources."

He said having an overdraft of $2 million was 'normal' for any multi-million dollar business such as the council and interest would only be charged on days the overdraft facility was being utilised.