Local Government Minister Shelley Hancock issued the warning during a commercial radio interview that she backed a call from Coffs Harbour MP Gurmesh Singh to halt progress on the cultural hub on the state's mid-north coast due to the downturn sparked by COVID-19.

She told Ray Hadley that it was "foolish and rash" for the council to vote to progress the Cultural and Civic Space during the coronavirus pandemic.

"My view is [to] pause it, otherwise I'm going to pursue some legislative changes about this," Ms Hancock said.

"This is a really bad message to send to a community that is totally divided on this.

"It's not necessary at this stage when every council, state, and [the] Federal Government are trying to direct hard earned resources … toward COVID-19."

Ms Hancock said she was compelled to intervene after Coffs Harbour Mayor Denise Knight criticised Mr Singh's letter to councillors that urged them to support a motion at last week's meeting to pause the project until after the COVID-19 crisis.

The motion was defeated by the mayor's casting vote which broke a stalemate between councillors tied four in favour, four against.

A new library, museum, and art gallery are among the facilities housed in the cultural precinct, but the inclusion of council chambers is a major point of contention dividing the community and its councillors.

The council planned to fund the construction by selling four of its buildings, including its existing offices, and applying for a loan from the State Government's financial authority, TCorp.

Ms Hancock said legislative amendments made due to COVID-19 prohibit loans for works on council offices.

She said that means the Coffs Harbour City Council would not be able to borrow money to build the Cultural and Civic Space for the foreseeable future.

"In that context, I've asked [the council], in agreement with Gurmesh Singh, that we pause the project until we come through COVID," she said.

She warned further law changes were possible to prevent the council from borrowing the money for the cultural hub.

No formal correspondence received

A council spokeswoman has told the ABC it has not received any formal correspondence from the minister, and the council maintains it is in a strong financial position to proceed.

Ms Hancock said she would not weigh in on the project after the council's plans were investigated in October, off the back of a petition tabled in parliament of more than 15,000 signatures opposing the build.

The shadow minister for local government, Greg Warren, said Ms Hancock's backflip was concerning given her office found the council had not breached its statutory obligations.

"What her motivation is she will have to explain that herself," Mr Warren said.

"But if she drafts any kind of legislative changes we will have to review that and consider a position."

The mayor said she had been left confused by the mixed messages from the State Government, particularly given the announcement by Planning Minister Rob Stokes to fast-track major building projects.

"They are saying on one hand 'build infrastructure, get locals jobs', then they're telling us 'don't provide it'," Cr Knight said.

"Give me something in writing to tell me we can't do this, give me a really good reason, and we will re-assess it."

Coffs Harbour City Councillor Sally Townley is one of the four councillors who have consistently voted in support of the Cultural and Civic Space.

She said Ms Hancock's comments amounted to political interference in council processes.

"There seems to be this sentiment that if you don't say nice things to and about the member, if you dare to disagree with them, then you will be punished and the Government will withhold money," Cr Townley said.

Construction of the Cultural and Civic Space was expected to start later this year with a completion date set for 2022.