Councillors Bob Brooks and Doug Witty called it a waste of time and money, but were defeated in a vote 6-2.
"I'm just amazed at the amount of committees we're creating," said Witty.
"It seems every time we have to decide something we form a committee."
The city's special grants process has undergone numerous changes over the years.
At one time, the $100,000 the city set aside to be split among various non-profit organizations was given out twice a year, but is now doled out once at the beginning of the year.
Last February saw 24 groups in all seeking their share of special grants funding for a total of $267,291 in requests.
The highly competitive process saw only 16 groups awarded funding.
Coun. Kevin O'Reilly said forming a committee made up of three members from the public, plus the mayor and two city councillors, will help take the "politics" out of council decisions to award the money.
Council will ultimately still have to make the decision on who gets the money and how much, but only after hearing recommendations from the committee.
"I'm willing to try this out for a year and see how it works," said O'Reilly. <
Coun. Alan Woytuik added that the special grant timetable comes at a bad time of year, when council is already deeply engrossed in budget decision-making.
Brooks, however, argued that allowing a committee to bring recommendations forward will make the process even more political should councillors vote against them.
"It sounds like most of the councillors won't be reading submissions and making uninformed decisions, but you know that won't happen," said Brooks.
"You'll read them anyway. If you think there's politics now, wait until the recommendations come forward.
"It's going to make it more political after we go against the recommendations."
Brooks' suggestion that councillors might not read submissions from groups seeking grants drew an angry reaction from O'Reilly, who demanded the mayor force him to make a retraction.
"I object to the insinuation from the previous speaker that council won't read the submissions," said O'Reilly.
Mayor Gord Van Tighem declined to act on his demand, stating that Brooks had already said council still intended to read them.