Councillor James Purcell, who was chair of the Port of Port Fairy Committee during negotiations for the project said the new building was supposed to be leased out as a restaurant and events space to bring in vital revenue that could fund the renewal of port assets.

"The restaurant would raise a significant amount of money and that would future-proof the port," Cr Purcell said.

The redevelopment ended up costing more than $3.1 million, with the Port of Port Fairy contributing $1.6 million and the state government $1.4 million, while Moyne Shire Council put in $88,000.

Cr Purcell said the understanding at the time was that all revenue from the wharf building would go to the Port of Port Fairy to be spent on port assets.

Instead, the revenue goes into the Moyne Shire Council's consolidated income.

Former mayor Colin Ryan, who took over from Cr Purcell as chair of the port committee, said the agreement was for revenue to all go specifically to the port.

"The money should go to the port, not the council and that was never my understanding of how it was going to work," he said.

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Moyne Shire Council suggested it was not an issue that the revenue went into general council income, rather than being sequestered for the port.

"Revenue raised from the wharf building goes into council revenue, which can then be used to support projects within the port precinct which are not funded under the funding agreement with the (state) Department of Transport," Moyne director of infrastructure and environment Edith Farrell said.

The council also said it was never realistic to expect revenue for the wharf building - which totals roughly $120,000 per year - would future proof the port, and that the revenue provided essentially no funding for asset renewal in the port.

"Approximately $70,000 of the revenue raised goes towards depreciation of the wharf building and general maintenance per annum. Council also allocates $40,000 per annum towards dredging within the port," Ms Farrell said.

After these expenses were accounted for, there was very little annual revenue left over, Ms Farrell said

"Some of the revenue may be used for state-owned and operated port asset maintenance - such as dredging in the port - or it may be used for maintaining council-owned-and-operated assets such as the wharf building."

Cr Purcell said he didn't understand why 60 per cent of the revenue raised by the wharf building was being spent on depreciation and maintenance.

Depreciation is an accounting practice that sets funds each year to pay for the renewal of an asset when it ultimately needs to be rebuilt. Cr Purcell said the depreciation claim confused him.

"The building costs were all money saved by the port, along with a state government grant. When it's rebuilt the same thing will happen again," he said.

"I can't figure that out, It just doesn't have any logic to it.

"I don't know what they're doing with it, I don't know why they are depreciating it."

Ms Farrell said the depreciation costs were a legislative requirement.

"Council acts as the committee of management of the wharf building and under Section 17B of the Crown Land Act is responsible for its upkeep," she said.

"As the committee of management, council is responsible for maintenance, renewal and any required capital upgrade, this is why we need to account for depreciation.

"This situation is no different to other building facilities where council is the committee of management."

But Cr Purcell asked why the $1.6 million from the Port of Port Fairy and $1.4 million from the state government were required if the previous building had also been depreciated under the same legislative requirement.

He also wondered why $40,000 of the wharf building's revenue was being spent on dredging in the port, since that was a state government asset and should be maintained using state funding.

Ms Farrell said council shared the dredging costs with the state government.

"The $40,000 from council pre-dates the existence of the wharf building and the revenue generated from annual lease fees - it has been an allocation within council's budget for many years," she said.

"Dredging works provides benefits beyond the operations of the port - particularly the sand replenishment that it provides to East Beach. It is considered a legitimate expenditure for council to contribute funds to."

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