The work, costed at over $4m will provide an additional 201sqm of gallery space to the existing 181sqm, industry standard environmental control, additional 36sqm of storage space, workshop space for community art groups and the roof to gallery 1 raised to accommodate services.

It will give the gallery the ability to host touring exhibitions from state and national lending institutions.

In June 2020 council received $2,470,363 from the federal government's Building Better Regions fund.

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The money was given for the redevelopment of the gallery, construction of an indoor sports facility, and to upgrade a local skate park. The funding required matched funding.

Council said $1.67m from the Building Better Regions federal fund was allocated to the gallery re-development. The commitment of matched funding was provided through agreeing to borrow $1.9m.

However council had hoped to get state funding to cover the $1.9m but was not successful. It was then left with the option of borrowing the $1.9m or returning the federal funding.

After agreeing to the borrowing plan as part of the $2021/22 budget, council went out to tender for the work. In the interim costs have ballooned, something anyone building a home would be familiar with; both steel and timber prices have seen increases of over 70 per cent.

It means that council will have to borrow an extra $630,000 for the project and will be looking for philanthropic donations.

Councils director assets and operations, Ian Macfarlane said that council had gone out and got very competitive rates for the work and was keen to lock in a contractor.

"We looked hard and want to lock it in; we've built in a contingency - it will go up but we have mechanisms in place to lock it down," Mr Macfarlane said of the contract.

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Asked about any other potential state funding, Mr Macfarlane said there was a risk that if council waited, it "may risk the chance to lock this price in".

There are several pressure points in the re-development and as well as the risk of cost escalation, there is also timing. The federal funds for the regional gallery must be expended and work completed by December 2022.

Mayor Russell Fitzpatrick said he didn't want to see the budget cut and end up with a second rate facility, money would be tight but "we have to be realistic about what can we do," he told councillors.

In the business paper for the council meeting staff acknowledged communication would be important in helping to manage community and stakeholder expectations.

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