Despite a record overrun of $153,000 this year, a council workshop on Thursday night determined the festival would continue the tradition of providing family entertainment to the Warrnambool community and regional visitors.

Councillors were divided on the decision, with several in favour of taking the event in a different direction.

Mayor Michael Neoh said the festival, which brings thousands of visitors to Warrnambool over the winter school holidays, was an important part of the city's public image.

"This is an event that not only provides entertainment, it provides a boost for tourism and positions us as a family-friendly city," Cr Neoh said.

"For next year's festival we'll work on strengthening community involvement and ensuring that the operational side of the festival is as efficient as possible.

"There were various opinions and a good discussion on ideas, with the majority supporting to continue on this year."

Cr Neoh said some of the new concepts under consideration included a focus on children aged 12 and under, adult ticket interchangeability, and marketing to directly target Melbourne and local families.

"We've spoken to people in the industry at a high level who said the product is good but marketing was an issue.

"We will try to get back into maybe the 12 and under age bracket, rather than trying to expand to young teens.

"We want to have a flexibility with tickets for parents and guardians, particularly for local people."

The mayor said there would also be greater council scrutiny over the budget, in attempts to tighten up the spending.

"I've made it clear the monitoring of the budget and expenses should be done at a director and chief executive level, not at program level.

"We've also put forward the possibility of a reference group from stakeholders, who might be people that were part of the festival years ago, they might be business people, marketing people, or tourism groups, because we want community ownership of the festival."

Cr Neoh said it was important for local businesses to engage in the festival, especially sectors that did not traditionally benefit.

"We want to try to engage businesses who don't link into the festival.

"There's no doubt accommodation and hospitality see business in those times.

"I think what was conveyed last night is that different businesses get different benefits."

Cr Peter Hulin, who has been a longtime proponent of moving the festival to Lake Pertobe, said the workshop did little to address the issues facing the costly event.

"Anything I heard last night just left me speechless," Cr Hulin said.

"(Other councillors) get that there's an issue - there's just no understanding of how to fix it.

"It's rather depressing to see more money be put into Fun4Kids when I firmly believe there are better things we could spend out money on relating to children's activities.

"If Fun4Kids is bringing such great economic benefits to the city, all these shops wouldn't be shut in the CBD."

Cr Hulin said it was absurd to spend $450,000 on a week-long festival when upgrades to Lake Pertobe could make it a year-round attraction.

"It's a wonder (other councillors) are not getting round in a horse and cart - that's the line of thinking going on."

Cr Brian Kelson told The Standard the council needed to address the loss of $153,000 and how it would be covered on top of the $450,000 funding.

"There are no guarantees that next year's event will be any different," he said.

"I can not endorse any event that loses $593,000, which then becomes a burden to the ratepayers of Warrnambool."

Cr Neoh said alternative ideas would be considered but the funding decision had to be made to give the event some certainty.

"People need to be confident they can book ahead for the festival and it was already in our budget for the $450,000.

"It was disappointing to see the number of festival goers not reach our expectations but we still feel the festival has much to offer Warrnambool.

"Surveys of those who attend Fun4Kids consistently show they enjoyed their experience and that the festival was a key reason behind them coming to Warrnambool.

"The public debate over Fun4Kids in recent weeks has reminded us that people are fond of the festival and hold it in high regard."