The option would have to be adopted by the end of this financial year on June 30 to be included in the 2017/18 Annual Plan.
The rebuild option would see a rates rise of around two percent, which would be spread over three years but council finance manager Alan Menhennet said at this stage there were still a lot of unknowns.
"For example, if we reduce the footprint of this building, then the land behind the building is for sale. All we're talking about [today] is the bigger picture."
Regardless of which option the council and community finally settle on, 125 council staff will be moved out of the main council building by July because of the asbestos risk.
The original part of the council building was constructed in 1968 and it was added onto in 1984, 1989, 2004 and 2011.
Cr Anna Park said a new building would be a good chance to future proof a civic facility for the future and build something to the correct earthquake standard.
"It's not about a plush building on the lakefront. We need to look at having a fantastic civic centre where people feel welcome to come in and be more involved with council."
But Turangi-Tongariro councillor Cr Zane Cozens queried why Taupo should get a building upgrade when Turangi did not.
Council chief executive Gareth Green said Turangi staff's health and safety was just as important as in Taupo. However most buildings had asbestos in them and the Turangi building was not in the same state as in Taupo, where the asbestos is friable, or flaking.
"My primary requirement is to ensure that the staff in these buildings are safe, and the staff in Turangi buildings are safe. It's not ideal [in Turangi] but I can't say the same about the staff in this building."
Mr Green said while there were still unknowns involved in the options of repair or rebuild, he believed there was enough information for the councillors to indicate their preference.
Councillors Tangonui Kingi, Christine Rankin, Anna Park, Rosie Harvey, John Williamson and Rosanne Jollands voted in favour of the recommendation that the council's preferred option is a new building at 72 Lake Terrace and that it will be included in the consultation for the Annual Plan. Councillors Zane Cozens, John Boddy and Kirsty Trueman voted against.