The new cap means Port Stephens Council is set to receive only an extra $400,000 next financial year a minor addition to rate revenue of more than $44 million.

Cr MacKenzie said with the cost of maintaining roads and infrastructure rising at about nine per cent per annum, there was no way the council could properly meet demands from ratepayers with the 2.6 per cent rate cap.

‘‘It’s a demented decision that makes no sense whatsoever,’’ he said.

‘‘The cost of roads and infrastructure is constantly rising and is now at about nine per cent.

‘‘We are heading for a situation where all the roads will go back to being gravel and we’ll have to buy four graders and just keep grading the roads, it’s just stupidity.

‘‘At some point the ratepayers or taxpayers are going to have to foot the bill for roads.’’

Cr MacKenzie said he had expected rates to be capped at no less than four per cent, and would be applying for a variation from the NSW Government.

‘‘We will be looking for the support of the people and I think that if we can put a strong case forward they will get behind us,’’ he said.

Cr MacKenzie said the council would now seek permission to raise rates by six per cent to maintain and construct new roads and other infrastructure.

He said he was not concerned about balancing the budget in the light of the council’s $10 million deficit last financial year.

‘‘That deficit is rubbish,’’ he said. ‘‘It’s a paper deficit based on the devaluation of some property.

I take accountants with a grain of salt, what we need to do is push on, we are not broke.’’