The council has already set aside $235,000 from the first round of the Federal Government's economic stimulus package for the refurbishment.

A report to the council last week said that the "orderly development'' of Collins Place and to accommodate any future redevelopment of the Clunes Museum the public toilets needed to be located on the eastern side.

The sale of council-owned land in Canterbury St, Clunes, will fund the project.

The report said that some years ago the council had helped the Clunes Museum Committee of Management with developing concept plans for redevelopment, which included a visitor information centre and housing memorabilia from the Clunes Sub-branch of the RSL.

"The overarching vision that prompted the development of the concept plans was to establish a gold interpretative centre in Victoria's First Gold Town,'' the report said.

"In the original concept plan it was proposed that the current public toilet facilities be refurbished and incorporated in the redevelopment at a cost of approximately $250,000.

"The estimated cost of the redevelopment, including the cost of refurbishment of the public toilet facilities at that time was $2.1 million.''

The report said a second round of federal funding, opening on July 1, could help fund the redevelopment, which would also include the relocation of the Clunes Library _ providing access to a further potential $500,000 from the Living Libraries program.

The council would then sell the branch library building and use the money towards the redevelopment costs, the report said.

"The Clunes Museum Redevelopment proposal, if it proceeds, will enhance the town's reputation as Victoria's First Gold Town and will position the town as a showpiece of both historic and modern architecture.

"Its value in economic and cultural terms should not be underestimated.

"Given the great potential at the moment to attract government funding, council has a once-in-a-lifetime opportunity to get it right and to oversee a development that will be a source of pride to the people of Clunes, the Hepburn Shire and the wider region.''