The newly elected Albury Council will face its first serious test of strength on Monday night after staff recommended ratepayers double their contribution to the project.

The council has been unable to secure $3.5 million from the NSW government to match the commitments already made by ratepayers and the federal Labor government.

In a report compiled by acting general manager Michael Keys, the council is being asked to proceed with the $10.5 million redevelopment by committing another $3.5 million from cash reserves, loan funding or a combination.

Mr Keys said from a “conservative financial perspective” the funding by either option could be achieved without affecting the council’s medium to long-term financial objective to achieve a surplus or break even operating position.

“Based on assessments of council’s long-term financial plan there is the capacity for council to have a higher level of loan funding while remaining within the good category for the Division of Local Government’s debt service ratio benchmarks (below 10 per cent),” he said.

The council has to act immediately on the art gallery under conditions imposed by the federal government funding.

Confirmation of the funding arrangements were needed last month.

But the council was granted an extension as discussions continued with the state government.

NSW deputy premier Andrew Stoner officially informed the council on November 14 there was no funding.

The project must be completed by March 2015 and any delay could have impacts on the federal government funding.

Mr Keys has also proposed a working group investigate all philanthropic and alternative fund-raising options for the gallery and its collection.

It would include the mayor Alice Glachan and the council’s delegate on the cultural precinct advisory committee Cr Graham Docksey and representatives from Albury-Wodonga Art Foundation, Friends of the Albury Regional Art Gallery, chamber of commerce, Regional Development Australia Murray region and Murray Regional Tourism.