In 2011 a lease was prepared, but the organisation told council that it could not accept the terms because the pavilion had run at a loss and was depleting the organisations's financial reserves.
Despite that, Progress Castlecliff said it was keen to continue managing the pavilion if council could provide a $2900 payment to meet its operational shortfall.
From July 2009 to June 2011 the facility had been used once a week, with most of those users non-profit organisations.
Councillor Sue Westwood said she was concerned the council could be considering selling off property that was put there by philanthropic people in the community (it was built in 1966 with funds from the William McAlpine Duncan Trust and any future arrangements for the pavilion would have to be discussed with the trust).
Ms Westwood said providing Progress Castlecliff with $2900 a year was a small price to pay if it was going to help maximise use of the pavilion.
"There have to be potential users, and it would be shortsighted of council not to look at them," she said.
Councillor Nicki Higgie said maintaining the hall filled a social benefit, and she was opposed to any suggestion of demolishing the building.
Greg Morris, the council's deputy property manager, said council would face costs of around $100,000 to maintain the pavilion, and that needed to be weighed against the community good.
Misty Moonbeam, chairwoman of Progress Castlecliff, told the committee the group was keen to carry on managing the facility because it was being used by community groups and schools.
Ms Moonbeam said use had been steady during the past two years, but most of that had been at minimal or no rental. There had been an average of two paid bookings a month, but those bookings alone were not enough to subsidise community use.
The committee decided there would be further talks with Progress Castlecliff about the lease and that an action plan be prepared that would come back to the committee.