He sent the official resignation letter to Newcastle council general manager Ken Gouldthorp.

However, it was also addressed "to the people of Newcastle" and The Star has decided to reproduce it in lieu of the mayor's weekly column.

"The controversy surrounding donations I made in the lead-up to the 2011 NSW elections may affect the proper functioning of Newcastle City Council.

"I therefore, tender my resignation as lord mayor of Newcastle, effective immediately.

"I believe that I am leaving the city in much better shape financially and physically than it was when I started.

"I would like to personally thank the general manager and staff of Newcastle City Council and the thousands of Novocastrians who supported change in our city. It has been a privilege serving the people of Newcastle, but now I will leave it to others.

"I encourage the elected council to continue focusing on local issues of significance for the Newcastle community and the progression of the city.

"Yours Sincerely

Jeff McCloy."

Mr McCloy was due to travel overseas yesterday on a long-planned two-week family holiday.

Newcastle general manager Ken Gouldthorp said a byelection of the Newcastle Local Government area would be conducted within three months for a new lord mayor.

In the interim, deputy lord mayor Brad Luke will step into the vacant position.