The potential closure of the facility has been flagged as a possible outcome of councillors' discussions, according to a report in the agenda for Monday's open council meeting.

Parts of the facility have reached the "end of their useful life" and despite recent major investment in a new roof, the council is now in an "unenviable position" where it needs to act to rectify a "vexed issue".

Councillors are being asked to either endorse or reject three options for major works at the site.

The cheapest option would be to spend $4.4 million, the second $5 million and the third $5.66 million - although those costs would likely be hit with a four per cent inflation increase.

The proposed works would include design and construction of gantries, roof shelter and associated works at the Caramut Road site.

The need for major works at the site came to light after the collapse of a walkway in October 2020 sparked safety inspections.

Making a decision on whether to award a tender for the works was the first of a series of decisions facing the council, the report says, with each coming with commercial, social and economic ramifications.

"Each decision is quite complex and has significant impacts on a much-valued service," it says.

If the councillors opted not to award a tender to refurbish the yards to a commercially competitive level, they would then need to decide if they will spend less refurbishing it to a minimum standard but that would leave the facility less viable.

The other option facing the council would be to "explore an accelerated close of the yards and the implications for the industry locally".

Local government has managed a saleyards in Warrnambool since 1883 with the location shifting from Raglan Parade to Caramut Road in 1970.

At its peak it had a throughput of more than 100,000 head of cattle and has ranked in the top five selling centres in the state for cattle for many years. In recent years it has remained profitable.

But a Worksafe investigation and structural engineering report in the wake of the walkway collapse highlighted "a significant number of failing or non-compliant structures across the yards" and include issues with auctioneers walkways, pens and other shelter structures.

"Further complicating the investment decision has been the escape of a wild cow which needed to be euthanized in a nearby location outside of the yards," the report says. "This escape was a reportable incident and the subsequent investigation by Worksafe will require the entire site to be fenced and cattle grids placed at the vehicle entrances."

The report says that any decision on awarding a tender to complete any upgrades was underpinned with the knowledge the service had a "finite future at its current location".

Urban pressure is likely to see the useful life of the site span 10 to 20 years rather than 50, the report says.

"The situation and ultimate decision before council is a culmination of previous indecision to effectively deal with the long-term future of the yards and the implications of their location becoming centred within an ever-increasing urbanised environment," it says.

The location of the saleyards was brought into question more than a decade ago but after a vocal campaign, it was decided to keep them where they are.

But increased competition combined with ageing infrastructure has created a situation where the council is "required once again to assess the level of investment into the saleyards and consider the implications of that investment decision".

Adding to the dilemma is the cost of borrowing money from State Treasury rising more than two percentage points which comes on top of inflation driving construction costs up four per cent.

"This additional cost has had a detrimental effect on the pay-back ability of a significant capital investment," the report says.

"An investment in the refurbishment of the yards remains a viable but marginal option for council... the financial capacity remains to complete the project but not without risk.

"At what price does the investment outstrip the return to the community?" That is the question facing councillors.

Best case would see the council pay back any borrowings for the project in 12 years, but conservatively 19 years.

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