Councillor Frank Deutsch put forward the proposal during a robust debate at council’s ordinary meeting.

The meeting spanned more than two hours with Cr Deutsch's motion calling for council to defer the redevelopment until it had further discussions with the State government which is providing $3.7 million towards the project.

Cr Deutsch said council should work towards a staged development of the project.

"This project is not urgent, nor is it, in my opinion, necessary," he said.

"Just because a few people want to have a beautiful building which lasts for another 500 years, that is no reason to spend a heap of ratepayers’ money on something instantly."

Cr Deutsch said moving to a staged project would allow council to defer the costs and lead to lower rates.

"Ratepayers and business people are unhappy with the ever increasing rate burden in the ARRC, which is one of the highest in Victoria."

In mounting his argument, Cr Deutsch cited council budget papers that reveal a loss of $185,000 for the Ararat Performing Arts Centre and adjoining Art Gallery last financial year.

"The expected loss this coming year is $180,000, this is unaffordable for such a small population," he said.

"We need to be financially smart and to make decisions that are for the benefit of all of our ratepayers.”

Councillors Gwenda Allgood and Glenda McLean backed Cr Deutsch.

Cr Allgood said she was concerned about the cost of the project.

"I don't believe we have the right design and I don't believe we can afford what we're looking at, at the present," she said.

“I don't think Ararat can afford all the bells and whistles that go with this."​

Councillors Fay Hull, Colin McKenzie and Gary Hull all opposed the motion.

Locked at three votes each Mayor, Cr Paul Hooper used his deciding vote to defeat the motion.

In outlining her opposition to the motion, Cr Fay Hull said it would be fiscally irresponsible to stage the development.

"I could not conceive any government which would be happy to have a municipality say we don't want $3.7 million or we'll take a bit now and a bit later," she said.

"We can not afford to not take this with open arms and proceed with it as expeditiously as possible.

Cr Hull said the Ararat Town Hall was one of the municipality's most iconic buildings.

"It is an iconic building and unless we keep working on it and accept the funding that building will go backwards," she said.

"As long as I have been on council (2002), there has been a call to upgrade that area.

"It won't be the ratepayers who will get the benefits of the upgrades, it will be children who haven't even been born yet."