The Navy's proposal for a national naval museum at Devonport Wharf asks the North Shore City Council for a 76-year lease at a peppercorn rental.
The council paid $2.9 million in June to snatch the town's run-down commercial wharf from would-be apartment developers.
It invited the Navy Museum to consider moving there.
Museum director Commander David Wright went to the council last week to ask for a long-term lease at a nominal rental on the basis of the economic good the museum would bring the community.
He said it would cost $11 million to convert the wharf building and set up interactive exhibitions.
The Defence Force would be asked for $5 million of that late next month.
The rest would be raised through sponsorship and donations.
"We need a reasonable rental because we need to keep admission free," he said.
"The objective of the museum is to let people experience the Navy, experience our heritage and learn by that. We don't want to turn people away by charging entry."
The council's own figures showed the museum could draw an extra 100,000 visitors to Devonport annually, potentially boosting the local economy by $8 million.
At present the museum draws 10,000 visitors a year to its obscure Spring St site, next to the naval base.
Commander Wright said operating costs were unknown at this stage but he assured councillors they would be the museum's responsibility.
"It won't come back to the city," he said.
Up to half of the running costs would need to be met from donations and earnings from corporate events, a cafe and gift shop.
In answer to public calls for the museum to merge with the National Maritime Museum across the harbour, Commander Wright said both had different heritage stories to tell.
The Navy's was worthy of telling in its own right and the museum should stay in Devonport where the Service first set up in 1840.
He also disapproved of suggestions that the decommissioned frigate Canterbury be part of a new museum.
"There's a huge cost to that but it's also a dead ship, which is pretty boring."
Instead, the aim was to have a world-class museum with high-impact presentation.
The strategic management committee confirmed the museum as the council's preferred use.
* The Navy Museum on Spring St is offering free tours at 11am daily during North Shore Heritage Week, October 30-November 3.
Cheap lease key to Navy's plan for wharf museum
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