FUTURE Warrnambool saleyards should retain local control and be within 20 kilometres of the city, according to a special reference group which has handed down its report for public comment.
The group also suggested Moyne Shire Council be involved in discussion on ownership, operations and location for a new livestock exhange.
It wants a "clear, transparent and open" process to replace the existing yards which have been run by the city council on Caramut Road for almost 40 years.
City councillors received the report in a closed meeting Monday and decided to put it out to public comment for a month before making a further decision on the issue which has divided the council and community since a private operator proposed two years ago to build a $10 million venture in the east replacing the municipal facility.
Reference group chairman Rob Wallis said all 12 group members recognised the yards were ageing and costing more to maintain.
"People recognised that we need a state-of-the-art facility," he said.
Three options were selected from a list of nine for recommendation as models for future saleyards.
The preferred option was to build, own, operate and transfer (BOOT), ahead of a co-operative model and private ownership.
Under the BOOT option land would be owned by the council or councils, and the selling centre operation put out to private contractor to build and operate for a define period of time after which it would revert back to municipal ownership.
"That gives local stakeholders influence on how it operates because if would be on council land," Mr Wallis said.
"The group felt both councils should take together constructively.
"They realised the council would be struggling to raise the necessary capital itself."
He said the co-operative option would be complex to set up, but could have a board of directors and local membership. It would be based on council-owned land.
"Some members of the group argued that private ownership was the best," he said.
"However this was a low preference because of anticipated rise in user charges and lack of influence by users."
The group also acknowledged the existing livestock exchange was well run, profitable and had a management respected by stakeholders.
It also acknowledged the city council would find it difficult and be reluctant to raise the necessary capital to to establish another elsewhere.
"The group acknowledges Warrnambool City Council policy that states not only is the livestock exchange in an inappropriate location, but that it does not wish to own or operate such a facility if other suitable arrangements can be made," the report said.
"It should be noted that some members of the group oppose this policy."
The report is available on the council's website or from the civic centre.
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