This is not the image the council wants to project for the St Kilda Festival.

This is not the image the council wants to project for the St Kilda Festival.

THE City of Port Phillip knocked back a $500,000 sponsorship deal that would have guaranteed the future of the St Kilda Festival in 2013 because the proposed sponsor was perceived to be at odds with its sustainable transport policy.

The Age has learnt that the council employed an external contractor, New South Wales-based Sound Campaign, to find a major sponsor to help underwrite next year's festival. In July, Sound Campaign presented a package in which Jeep, a division of the Chrysler motor company, would have naming rights over the festival. That deal was rejected outright.

''It would be fair to say that the sponsorship arrangement that was put to us was not consistent with our values,'' Cr Janet Bolitho told The Age yesterday.

Crowds enjoy the Festival Sunday during this year's St Kilda Festival.

Crowds enjoy the Festival Sunday during this year's St Kilda Festival. Photo: Melanie Faith Dove

''We are entirely, utterly and wholly committed to a sustainable transport agenda and Jeep does not fit in there.''

That principled stand has, however, put next year's festival at risk, with Cr Bolitho believed to be among a faction led by deputy mayor Frank O'Connor who question whether the main attraction of the eight-day event, the final-day Festival Sunday, should be cancelled because of a projected budget blowout.

The council has allocated $730,688 towards the cost of staging the festival next February. Sponsorship is expected to contribute about $145,000, and the state government an additional $109,000. The council has estimated the total cost of the festival at between $1.03 million and $1.2 million, meaning a shortfall of $200,000 or more.

But Cr O'Connor believes the true cost of mounting the festival is closer to $1.7 million, leaving a much larger shortfall.

At a meeting on September 11 he tabled a motion, passed unanimously by the seven councillors, that reaffirmed the council's support of live music while calling on it to consider ''the option not to proceed with the 2013 Festival Sunday''.

Festival Sunday accounts for more than 80 per cent of the cost of staging the festival, and draws between 300,000 and 400,000 people a year.