The hall was built in the 1950s and officially opened in 1960, and Cromwell's war memorial was moved to the site in the 1980s.
Little money has been spent on the hall since it opened, and some community groups had expressed frustration at its limitations.
Central Otago District Council business development manager Jonathan Gadd said there was a lack of suitable meeting spaces in Cromwell, particularly for small groups, and the community's needs had significantly changed in the years since the hall was built.
Maintenance and an upgrade of the hall had also been on the community board's agenda for years, and members decided if any work was worth doing, it should elevate the facility to meet the community's needs today and in the future.
"It used to be the heart of Cromwell, and we want to attract more people to the facility, to again make it a central part of the community. It's not user-friendly at this stage . . . we want to get another 50 years out of it at least," board member Murray MacMillan said.
Board chairman Neil Gillespie said nothing would be achieved by spending money on maintenance without upgrading the facility.
The board commissioned Beca Infrastructure Ltd to prepare concept plans for the redevelopment, which included an adjoining cafe and extensive landscaping.
At yesterday's board meeting, members resolved to adopt the plan in principle, in order to use it for public consultation.
The plan included two main phases, which could be funded or constructed separately, depending on community support and/or the availability of funding.
In total, the proposed redevelopment would cost about $3 million, phase one of which would roughly cost $1.6 million and phase two $1 million.
All other costs, including landscaping, design and management fees, as well as contingencies, would cost about $400,000.
Board members roughly calculated it would cost Cromwell ratepayers an additional $30 each year, based on depreciation and the average total rate.
In this financial year, Cromwell ratepayers pay $28 for halls.
Mr Gillespie said there was no money allocated for the redevelopment in this financial year, and funding would be a major issue for the board to work through.
Members yesterday resolved to make draft applications for funding to the Central Lakes Trust and Community Trust of Otago, to streamline the process following public consultation; providing there was support from the community.
It also resolved to have an engineering assessment of the hall made, and work with district council staff to determine whether relocating Cromwell's museum into a redeveloped hall would be a good idea.
The board will present its proposal to the public at a meeting in the hall on July 10 from 7.30pm, followed by an open day at the hall on July 11 from 9am to 1pm.
Submissions close on August 10.
