Newcastle Mayor Jeff McCloy has resigned after NSW Premier Mike Baird called on him to “do the honourable thing” following his appearance before the NSW corruption watchdog last week.

Mr McCloy has written to the city saying he decided to resign because the controversy over his evidence “may affect the property functioning” of the council, Fairfax Media reported on Monday.

• So sorry for that scandal: Baird

Last week, the Independent Commission Against Corruption heard disgraced MP Tim Owen took $10,000 of prohibited donations from Mr McCloy in late 2010, just months out from the March 2011 election.

Mr McCloy later told the hearing he sometimes felt like a “walking ATM”.

The commission is investigating Liberal party funding raising activities in the lead-up to the 2011 state poll.