The Otago Daily Times was told plans for the partial demolition of the gallery had been confirmed, with work to begin in August next year.
It followed a tip-off last month the council was planning to partially demolish the gallery, with bays at the end of the building to be removed to allow expansion of the nearby University Oval cricket ground.
Plans for the building have been the subject of speculation and behind-closed-doors discussions at recent meetings of the council's community development committee.
Community life general manager Graeme Hall had expected to make an announcement by early December, but when contacted yesterday said discussions were continuing as the council worked through several "issues".
He hoped to make an announcement before Christmas, but denied a deal had already been reached.
"We are aware there's lots of talk and rumours out there.
"My comment is, they are talk and rumours," he said.
