Ms Altmann said the issue was much bigger than the future of Cannon Hill.

She said a business case for locating a new art gallery at Cannon Hill should go ahead and be a catalyst for a much broader discussion on the future of the Merri Street tourism and heritage precinct.

"We have a perfect opportunity to look, as a community, at a greater vision for the entire Merri Street precinct from Flagstaff Hill to the old gasworks next to Harris Reserve, not just Cannon Hill in isolation," she said.

"This area is arguably the 'golden mile' of Warrnambool, with superb views over the coast and Lake Pertobe, and includes the historic railway building, and yet there is no overarching plan for its future.

"Instead, we continue to approach this precinct in chunks, not knowing how each piece will work with other pieces, and issues like the future of the ailing Flagstaff Hill site remain unresolved after a decade."

She said if the art gallery was to go at Cannon Hill, the design would have to be the number one factor and be looked at really carefully.

"I would rather see the whole issue of Flagstaff Hill, Cannon Hill and the gasworks addressed as one connecting issue. To me they're all related," she said.

"We all have nostalgic memories of Cannon Hill and continue to enjoy that space... but I think there is room for a much bigger conversation about how we look at this whole area into the future."

Ms Altmann said given large portions of the area included Crown Land, the Warrnambool City Council should be fully supported as it worked with the community to develop a broader vision.

She said as a local member she would make sure there was robust, constructive and fully transparent community consultation for the precinct.

"That includes developing a business case for the Cannon Hill site which doesn't lock the council into a decision, but helps the community make a decision," she said.

Ms Altmann said the art gallery redevelopment was an example of where, despite the council working through a series of steps to consult the community, things can go wrong.

"What should be one of the most exciting projects for our city over the next decade is now bogged down in mis-information and fear," she said.

"Rather than fuel those fears, which gets us nowhere, we need to refocus on gathering information that will help us make a decision on the art gallery location and how it fits into a much broader vision for this prime part of our city."

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