Newcastle Maritime Museum Society president Bob Cook says the group is "not happy" after City of Newcastle gave it a seven-day ultimatum to hand over its collection.
Council chief executive officer Jeremy Bath issued a media statement on Monday saying the museum society had "backflipped" on a public promise to donate its collection to Newcastle Museum.
"If the maritime museum society fails to transfer ownership in seven days, in line with the resolution of its former board in May 2018, the City will retire its trusteeship," the statement said.
Mr Bath clarified at a media conference on Monday that the ultimatum gave the society until Monday to agree to donate the collection, before its annual general meeting on August 26.
If it does not, the council will remove itself as trustee and effectively hand the collection back to the society, which has few options for storing or displaying the 7500 maritime artefacts.
The museum collection, formerly housed at Fort Scratchley then Honeysuckle's A Shed, has been in the council's care and in storage at a Carrington industrial site since May 2018, when the society folded with a six-figure debt.
The owners of the storage space are charging peppercorn rent, but the council has paid a $20,000 bond.
The disagreement between the council and the museum society, which still owns the collection, revolves around the collection's long-term future.
The council wants it on display in Newcastle Museum, but the society wants the council to incorporate it into a maritime-themed luxury hotel on the site of Queens Wharf.
Mr Cook said the museum society and two consultants had presented to the council a "visionary" Queens Wharf redevelopment proposal using items from the collection as a "maritime experience, not as a museum".
Under that plan, the collection would go on display at Newcastle Museum for the next five years before the hotel opened in about 10 years.
Mr Cook said the museum society had proposed transferring the collection to the council with a list of conditions which maintained for members an "ongoing relationship" with the items until the "final outcome".
Mr Bath said the lease over the storage facility expired in September 2020 and the museum society should focus on how the collection would be stored after that date.
"The suggestion that the transfer should be dependent on construction of a five-star hotel on the Foreshore is not something I can agree to in the foreseeable future," he said.
Newcastle Museum director Julie Baird said it was "financially unsupportable and unacceptable" that the museum society "somehow retain ownership and curatorial control" of the collection after donating it.
Mr Bath and Ms Baird said the museum committee had written to the council saying ratepayers would have to take on the debts of the former board, which Mr Bath estimated at $300,000, but Mr Cook said those debts had largely been waived and the museum now owed no more than $20,000.
"Talk of a debt of $300,000 is absolute bulls---," he said.
Mr Cook, who joined other museum representatives in a meeting with Mr Bath on Monday morning, said he was disappointed that the council had "pushed their view" to the media before giving the society a chance to decide how it would respond to the "ultimatum".
He said the society could not make a decision until its meeting on August 26.
"There's no reason for it to be seven days, by the way," Mr Cook said. "There's no timeline on this whatsoever. There's September next year."
He said the museum committee had written to the council saying it wanted to work towards transferring the collection to the council but was asking it to "do better" than housing it in Newcastle Museum.
"That's the crux of the problem ... the passionate people who care about the collection that had been accumulated over 47 years, those people said, 'We've got to do better than a room in the museum. A room in the museum is the wrong result for 47 years of maritime heritage collecting.'
"What Jeremy's come back to us today and said is, 'We don't care what you think. Hand it over to us and we'll do whatever we like without your input, or take your collection and do whatever you like with it.'
"I think people will realise that our maritime heritage is far bigger than a room in a museum. I'm arguing this town is not trying hard enough to do our best."
Mr Bath said the council needed a year to plan for what would happen to the collection after it came out of storage.
Mr Cook said the society "needs to decide how it is going to deal with the council on this matter".
"We've already agreed that between now and the end of this week our committee will decide how to put a subject to our members on August 26.
"We're not happy. What we can do about it is another thing. There are a couple of irons we have in the fire, in terms of our ability to convince the council that this isn't the right thing to do."