Arts Minister Don Harwin has labelled Newcastle council's proposed contribution to the city's gallery expansion a "scandal" while alluding to the possible creation of a fund next year that the state could provide a grant from.
Speaking after a sod-turning ceremony for Lake Macquarie council's Multi-Arts Pavilion at Speers Point last week, the minister called for Newcastle council to increase its level of funding for the $36 million project.
The council has previously proposed spending $6.4 million, and wanted the state and federal governments to chip in about $14 million each.
Hopes of the project proceeding were boosted in June when the Newcastle Art Gallery Foundation received a $10 million share portfolio bequest from Gallery patron Valerie Ryan.
The foundation has made an "in-principle" commitment to contribute $10 million towards the project, which includes more than $1.2 million obtained through fundraising.
Asked if that changed the government's position on providing funding, Mr Harwin said: "It sure does."
"I think the bequest is helpful, but today we've been at a project where the state government's contribution is about ... 30 to 40 per cent of the total cost," he said of the $3.5 million pavilion which the government contributed $1.3 million towards.
"The rest of the money comes from council. [Newcastle] council, to the best of my knowledge, has never been prepared to put in more than 10 to 20 per cent of the cost of that [expansion]. I think it's a scandal."
Mr Harwin's comments echoed remarks made more than a year ago about the council's contribution.
Council boss Jeremy Bath said at that time the council needed to get through a "gated process" and have a conversation with the state government about funding.
"Whether that contribution is $14 million or $7 million or $5 million, I'm very excited by the opportunity to sit down and have that conversation with the minister," Mr Bath said.
"At the end of the day, we have to play by his rules, and if his rules are that the NSW government wants to see more from the City of Newcastle, that's something I can work with."
Those conversations are understood to have taken place and Mr Bath said on Friday the council was prepared to contribute $7 million on top of $3.6 million already spent on planning.
Combined with the foundation's $10 million, the project still requires $19 million.
The council wrote to the state government last month asking for the outstanding amount to come from the $103 million Arts Maintenance and Upgrade Fund announced in the latest budget.
However, Mr Harwin said the project was not eligible.
"At the moment there is no existing capital funding program that could fund any contribution from the state government," he said.
"That's not to say that there won't be one in the future.
"I'm a great supporter of the Newcastle Art Gallery - their collection is arguably the best collection in the state other than the collection of the NSW Art Gallery itself.
"But I've always said that the council needed to lift their contribution in order to get this off the ground."
Newcastle, along with Wollongong, has been ineligible for the state's Regional Cultural Fund, which has supported 136 projects statewide over recent years.
"The Regional Cultural Fund was approved back in 2017 with particular guidelines based on the particular circumstances of the time," Mr Harwin said.
"It's a four-year program which expires in the middle of next year. We'll see what happens after that."
Mr Bath said the council would spend $1 million completing grouting works in February to bring the project to "shovel-ready" status.
"That project wouldn't be proceeding if I wasn't confident of securing funds for the gallery expansion," he said.
Newcastle state MP Tim Crakanthorp said he was "astounded" that there was a $100 million fund for "arts building works" but the project was not not eligible.
"This fund is clearly just another avenue for the NSW government to pour money into their pet projects," he said.