HORSHAM Rural City councillors are 'cautiously optimistic' that council has passed the next step in the city's town hall and art gallery redevelopment.
Heritage Victoria announced on Thursday it had granted a heritage permit to the council, which will allow for the town hall supper room to be demolished to make way for a foyer between Wilson and Pynsent streets.
However the project will face a Victorian Civil and Administrative Tribunal process in January and February.
Council received two objections to the project in October and a mediation hearing between the two parties is set for January 8.
Depending on the outcome of mediation, a VCAT hearing could follow in February.
Councillor Mark Radford said the permit was exciting news but there would be no 'clinking of champagne glasses' just yet.
"It will make a lot of people happy," he said.
"This is a significant step because it gives us permission to use the plans that we have spent so much time and money on.
"We now have the opportunity to link the two streets with a foyer, which goes back to one of the original goals of the plan in 2009."
Cr Radford said he understood the supper room would have importance to some people.
"However from the big picture point of view, to have a new performing arts centre and retain the town hall as so many want, I think this is a fair balance and that is a great achievement," he said.
"We are creating something new but respecting the old.
"However we are not there yet we haven't got the planning permit."
Mayor David Grimble said the granting of the heritage permit gave the project a clear direction.
"I think everyone has been looking for this to come through and we hoped maybe it would be before Christmas," he said.
"There are 23 conditions but it all looks reasonably straight-forward.
"I was always very clear that we wouldn't see any construction until mid-year but if we get a good result at the mediation obviously it is another step towards the process."
Horsham Regional Art Gallery director Adam Harding said the gallery was proud to have received support from Heritage Victoria.