"IPART's decision illustrates the obvious disconnect between most councillors and our community. At every stage, residents warned against this proposal," Port Stephens state member Kate Washington said.

"Now that the proposal has been rejected, we can all move forward and work together to prioritise local projects without putting more pressure on local families, businesses and pensioners who are already doing it tough.

"Councillor Giacomo Arnott deserves credit for this result.

"Cr Arnott stuck to his guns and gave voice to the community's overwhelming opposition to this proposal.

"I thank everyone who made submissions and raised their voices against this rotten proposal.

"Thank goodness IPART listened, because the mayor and the majority of councillors certainly didn't."

"This decision by IPART proves this was a rotten proposal from the start," Cr Arnott said.

"It shows that the alleged benefits put forward by council were not reasonable compared to the financial impact on thousands of families and businesses. It shows that when our community works together, we can stop poor decisions being made by elected representatives who refuse to listen.

"It's the mayor's job to run an effective council. He can't just throw his hands in the air and blame the community because they wouldn't stomach a rate rise that the independent tribunal itself labelled unnecessary.

"Families and businesses can now get on with their lives, being able to plan their finances and futures without being hit by an unreasonable and unsupported rate rise. This decision will be a huge relief for many, and I congratulate our community for its hard work and perseverance."

Geoff Washington, president of the Tomaree Residents & Ratepayers Association (TRRA), said that the organisation "welcomed the IPART decision" in the context of the reasons the independent tribunal provided for rejecting the rate rise proposal.

"One of the comments from IPART referred to the lack of community support, drawing attention to the results of an independent survey which found that only 14 per cent of respondents had approved the 7.5 per cent increase over seven years," Mr Washington said.

"As a ratepayers organisation, we could see the need for additional projects but we were not convinced about the excessive rate increase because of the impact on those ratepayers doing it tough and on small business.

"A better and more acceptable proposition would have been a less intrusive rate rise."

John Nell, the Port's longest serving councillor and a former mayor, described the decision as "quite tragic" for the thousands of ratepayers who have been waiting to have facilities upgraded and major works funded.

"I feel for the hard working volunteers at the countless sporting venues who work out of dated clubrooms and residents of areas such as Shoal Bay who live in fear of flooding every time it rains," Cr Nell said.

"These are projects which have listed for future works but could have been benefited from the SRV."

Cr Nell blamed an "idiotic system" where the Land and Environment Court could overrule a council decision on a development matter and then leave the council liable for ongoing costs or infrastructure.

"I have been on this council since the 1980s and yes I would be the first to admit that we as a council have got some decisions wrong but we have also had some great wins commercially such as the holiday parks," he said.

"But the council [rates] cannot keep up with the works required and this is why this decision has been a great disappointment."

Corlette Parks Reserves and Landcare Group's Keith Woodley said the IPART knock-back was a result of the council's own doing.

"Generally I believed a rate rise - a more modest one - was in order due to the poor conditions of our roads, et cetera. However, ultimately I think they have shot themselves in the foot when during the merger discussions they declared they were 'Fit for the Future'," Mr Woodley said.

"Could it be that they were exaggerating because why else would they be seeking the rate rise."

Tomaree Sports Council's longstanding president Bruce Scott has also expressed his dismay at IPART's decision, saying that many sporting and community clubs would suffer as a result of it.

"At the end of the day this is a blow for the clubs, the parents and the thousands of players who use such sporting facilities as the Tomaree complex. The main building is 40 years old and in need of an upgrade," Mr Scott said.

"How is the council expected to maintain and upgrade facilities to meet the expectations of population growth which means more kids playing sport?"

Mr Scott said that while he felt disappointed for the sporting fraternity, he was acutely aware that the 65 per cent rate increase would present a burden for many ratepayers.

"I can understand the views of those who opposed the increase because of the way it was set up, maybe the council could have looked at a smaller pegging," he said.