Newcastle council will seek a $22.6 million low-interest loan to expand the city's art gallery.
The council voted (7-4) on Tuesday night to pursue a 10-year loan from NSW Treasury Corporation at a 0.88 per cent interest rate.
A report prepared for councillors by the director of city wide services had outlined multiple funding options, including using cash reserves, but recommended the government loan.
The council had released details of the proposal last week with lord mayor Nuatali Nelmes saying given the "current favourable economic conditions" it was time to bring the long-planned expansion to reality.
Newcastle Art Gallery Foundation chair Susan Galwey later offered her support for the loan plan, describing it as a "sensible move" and a "once in a lifetime opportunity to take advantage of historically low interest rates".
The motion passed on Tuesday endorsed seeking the loan and pursuing state and federal funds. The elected council will still have to approve taking the loan.
Labor councillors and Cr John Mackenzie (GRN) voted for the motion, while the city's conservative councillors - independents John Church, Kath Elliott, Andrea Rufo and Liberal Brad Luke - voted against it.
Cr Kath Elliott said while she was in favour of "upgrading the gallery" past community consultation had not considered a loan.
She proposed deferring the matter until the council sought public feedback but her procedural motion was defeated. She said the council should ask ratepayers if they want it to borrow that amount of money and if the expansion was the project they wanted a loan used for.
Cr Luke (LIB) said it was too close to the election to borrow that amount of money and it should be "a decision for the next council".
"On top of the $3.6 million we've already put into this, borrowing another $22.6 million - we are hitting future councillors with that borrowing," he said. "I don't believe we should be doing that."
Cr Mackenzie said the loan, which would be coupled with $13 million from the art gallery foundation, was "not his preferred funding pathway" and he supported a "tri-partied agreement" for local, state and federal governments to all provide "a share" of funding.
"But we find ourselves in this extraordinary situation where the state and federal governments have reneged on that commitment," he said. "We have to find a way to move forward."
Cr Nelmes said the expansion had been discussed since 2004 and the loan was an opportunity to bring it to life. She described the plan as a "watershed moment" for the city and said council would still be able to pursue the "elusive state and federal" grants for the project.
The council would pay about $1 million interest over the life of the loan.
