The Whangarei District Council is to hold a referendum on the proposal for a Hundertwasser Art Centre for the city.
Local trust Prosper Northland has offered to build the $13 million centre at no cost to ratepayers after the council voted in June this year not to fund it.
The building had been designed by Austrian artist Friedensreich Hundertwasser, who lived near Kawakawa for many years before his death in 2000.
The council remains split on the project.
At a meeting yesterday, a motion by five councillors to get rid of the Hundertwasser plan once and for all was defeated - to loud applause from the packed public seats.
But the council also voted down a proposal by mayor Sheryl Mai to approve the centre and look into a rival proposal for a maritime museum and gallery.
After a heated and at one point abusive debate, the council finally settled on a compromise.
It would fully evaluate the second proposal at a cost of up to $100,000; compare the two, and hold a referendum in March next year at a cost of $80,000.
Councillor Crichton Christie said councillors acting in good faith would have approved it.
He said they had previously scored the Hundertwasser, and other proposed projects, against a matrix designed by another councillor Phil Halse.
He said Mr Halse's opposition to the project was inexplicable, given it topped the tests he devised.
Meanwhile, the trust that wanted to build the Hundertwasser Art Centre said the council's indecision over the project could be its death blow.
Chair of the Prosper Northland Trust Barry Trass said the Lotteries grants agency and other funders have more than $4 million on hold for the Hundertwasser - but he doubted they would be willing to hang on until March.
He said the trustees, who are Whangarei businesspeople and art lovers, have put months of work into their proposal to build the centre with minimal ratepayer help.