But questions remained as to whether the City of Launceston council was eligible for the grant, as it was not listed under the councils included in the Commonwealth's Drought Communities Programme - a key criteria for the grant.

The only Tasmanian councils included in that program were Devonport, Break O'Day and Glamorgan Spring Bay.

The council's chief executive officer Michael Stretton said rainfall and river flow data was used to help prove eligibility.

"The application for funding was made through a collaboration between the Coordinator General's Office and the City of Launceston last December, and was required to meet a range of eligibility criteria set by the federal government," he said.

"[It] demonstrated its eligibility against all of those criteria, including through the use of rainfall and river flow data to highlight severe rainfall deficiency in Northern Tasmania over an 18-month period."

The council received the $10 million grant as part of the Building Better Regions fund for the Creative Precinct development. The project will have the Paterson Street car park transformed into a bus exchange and Birchalls site to host the creative industries education precinct.

The council fielded questions about the proposed redevelopment and the council's relationship with Creative Property Holdings at Thursday's council meeting.

To be eligible for a Building Better Regions grant the applicants must prove the project would be delivered in a drought-affected location.

Evidence to prove the location is drought affected can include Bureau of Meteorology data indicating an extended period without rainfall or a significant decline in rainfall, if the project is located in a drought-declared municipality, if the local government area is eligible for the government's Drought Communities Programme and if the applicant can demonstrate the impact of drought on the economy or employment in the area.

Break O'Day received $30,000 in funding through the scheme, while at a meeting in December Glamorgan Spring Bay chose to apply for funding. GSB council applied for $295,000 to upgrade the Triabunna Wharf, develop a business case for a new mountain bike trail and write an economic development plan.

GSB council did not receive a grant.

Labor Lyons MHR Brian Mitchell said the situation was a clear display of "pork barelling".

"There are four specific eligibility criteria for this drought funding and Launceston doesn't meet any of them," he said.

"I think a Creative Precinct for Launceston stands on it's own two feet as a meritorious project but to say that it should have drought funding is just absolutely ridiculous.

"If there is a place in Tasmanian that doesn't qualify for drought funding it is the North - there are all sorts of places in Tasmania that are drier than Launceston that are not eligible for that funding ... if the government wanted to give $10 million to a marginal Liberal seat they should have just said so."

Mr Mitchell said the government should prove how Launceston met the eligibility criteria.

Data from the Bureau of Meteorology shows Launceston had below average rainfall in the 18 months up until December 2019, while the rest of the North had very much below average rainfall.

However the data also shows Launceston and the North did not have a serious or severe rainfall deficiency over that period of time.

BoM data also shows Hobart experienced very much below average rainfall in the 18 months to December 2018.

But a spokesperson for the City of Hobart council confirmed they were told not to apply because they wouldn't meet the eligibility criteria.

Liberal Bass MHR Bridget Archer said the project was supported because it would create jobs in the construction industry and help with education attainment rates.

The Examiner requested a copy of the grant application today and in June. Commercial-in-confidence was previously cited as a reason not to provide it.

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