In a 4-3 vote of councillors at Monday's council meeting, Cr Ben Blain's motion was passed which included a plan to begin stakeholder and community engagement based on the implications of not committing to the upgrade works.

"By going to consultation, this doesn't meant the yards have to go right now," Cr Blain said.

During the meeting councillors labelled it a "disgrace" the facility had been allowed to fall into disrepair, while others warned that by not going ahead with the works the city's economy would take a $35 million hit.

It was also flagged the amount needed to be spent on the facility was more likely to be double the tender amount.

Cr Blain said a substantial amount of work was needed to maintain the facility and any investment would only extend its life for a maximum of 20 years in a housing growth area.

He said the investment needed amounted to about five cents in the dollar of the current budget, and therefore a risk to council.

Cr Blain said the question was whether the council should invest or free up some cash so it could deliver more services. "Having the land as rateable property I think would exceed the current profits," he said.

Cr Debbie Arnott said there had a been a lack of significant investment in the saleyards and it had "fallen into quite a state of disrepair".

"It would be a dereliction of our duty if we didn't question the viability of spending such a large sum of money," she said.

"We do have to consider whether the community should bare that burden."

Cr Richard Ziegeler said it was his firm belief the council should do all it could to refurbish and retain the saleyards for the foreseeable future.

"The livestock exchange is more than a money-maker for Warrnambool, it's a social endeavour and a meaningful part of a country town," he said.

"It's been deliberately run down by the same people who tried to market Warrnambool as a cosmopolitan city by the sea, and for whom the coffee and gym lifestyle the invention of Lycra as the highest pinnacle of human achievement.

"The saleyards represent another artery for the lifeblood of this town and the people who live around the region."

Cr Ziegeler said he was happy to consider a future move but believed the council needed to invest and retain the saleyards.

Cr Otha Akoch said that if councillors rejected the tender now and then decided to go ahead with upgrades later, the works could end up costing more.

He said after visiting other saleyards across Victoria, Warrnambool was the "worst of all".

Cr Akoch said he supported the most expensive tender option because he wanted to see the council fix the facility once and for all.

Cr Max Taylor said it was the toughest decision this council had had to make but he firmly believed bringing the facility up to Worksafe requirements would be money well spent.

He said the saleyards "without a doubt" brought millions to the community annually - up to $35 million.

"If the saleyards are closed, the economy of Warrnambool will be at a great loss," Cr Taylor said.

Mayor Vicki Jellie said the ageing saleyards had been "dumped" many years ago and labelled it a disgrace that nothing had been spent on it.

She said the amount needing to spend on the facility could be double what was listed in the tenders by the time buildings and toilet facilities were added to the works.

"We are not a country town anymore, we're a regional city," she said.

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