A confidential council report seen by The Age shows developer PDG Corporation wants to build a 200-metre 70-level tower on the market's doorstep.

The report, by the council's director of city design Rob Adams, recommends PDG be appointed developer of the "Munro site", a parcel of buildings including the Mercat Cross Hotel at the corner of Queen and Therry streets.

The tower plan is part of the council's wider $250 million redevelopment of the market, the biggest revamp in its 140-year history, being led by Lord Mayor Robert Doyle.

Councillors are expected to support the plan to pay PDG Corporation $50 million to develop the site, if it succeeds in getting approval from Planning Minister Richard Wynne for the high-rise tower, and up to $80 million if it doesn't.

"If the developer is unable to obtain planning approval for the residential tower, having completed all the council facilities, the developer would receive a payment of $80.1 million," Professor Adams' report says.

Mr Wynne has already said that a 200-metre-tower on the site will not be approved.

In return for its $50 million payment, PDG Corporation would be required to build underground parking for 720 cars. This would free up the existing open-air market car park for development as a major new public city square.

PDG would also build a 120-place childcare centre, a community centre, artists studios and a gallery, and a large ground-floor retail space.

It would also be required to build 56 affordable units, to be managed by a housing association for those on low incomes.

In return PDG would win the air rights to develop a tower above the site. Drawings completed by PDG as part of the confidential report show three options for towers.

The report notes that another developer, CBUS Property, dropped out of negotiations over the site, leaving "PDG Corporation as the only bidding party to lodge a detailed response".

It also says that the council has already started negotiating with PDG to sign a development deed for the site. The council bought the site in 2014 for $76 million.

Peter Langtry runs the Polish Deli at the Queen Victoria Market. He said the council needed to be far more transparent about what it had planned for the precinct, because of the huge implications for traders.

"There has always been secrecy and no disclosure on this, and they've drip fed us," Mr Langtry said.

Asked why the matter was being heard by councillors behind closed doors, a council spokeswoman said it was abiding by the Local Government Act. The act allows councils to close meetings to the public for matters including development proposals, personnel matters and contracts.

She said the council was at least noting that it was hearing a confidential item, despite the Local Government Act not requiring it to do so. "Some councils simply have a 'confidential section' of the agenda with no further details made available to the public," she said.

Mr Wynne said last week that the council wanted to offset the cost of the market revamp through the development of two apartment towers - one on the Munro site and the other on Franklin Street

"Obviously they want to offset that [spending] by the development of these two towers. But they have to consider the broader public good, that we must ensure that the heritage integrity of this magnificent site is not compromised," Mr Wynne said, when voicing his concerns about the five-year redevelopment plan released publicly last week.