The deal includes strict new conditions for festival construction and deconstruction, as well as a substantial increase to the committee's refundable bond payment, after significant damage to sporting ovals in wet conditions at the 2022 event.

Moyne Shire mayor Karen Foster said council officers had worked for several months with the festival committee and the Southcombe Park Committee of Management to thrash out an agreement that kept everyone happy.

"Both parties have been really open to making it work for the best interests of everyone involved," Cr Foster said.

"The Folk Festival is an iconic local event, so we are keen to do whatever we can to ensure it's there well into the future."

Heavy rain during this year's event wreaked havoc on the "bump out" process for the festival, with the machinery required to dismantle the site leaving large holes and divots across the grass sporting ovals.

Repairs to the surface cost $17,529, as well as countless hours of volunteer labour from the Port Fairy Cricket Club and others.

An independent condition report found 14 sections of grass needed to be replaced due to "major damage to the playing surface", including wheel marks and mud holes up to 20cm deep. It recommended different machinery that would do less damage to the grass, as well as stricter construction procedures.

The new agreement adopted the advice, requiring turf-specific tyres on vehicles, matting to protect playing surfaces, and council approval before dismantling the site if it was wet. But the biggest change was a 400 per cent increase to the annual bond the festival committee have to pay, going from $4000 to $20,000.

When the new agreement came before councillors at Moyne Shire's November meeting, Cr Jordan Lockett said the bond increase was excessive, but festival committee vice president Shane Lenehan said they were happy to pay it.

"We've done a lot of work with officers behind the scenes to reach this agreement and we accept our responsibilities," Mr Lenehan said.

He said the COVID-19 pandemic had dealt the festival's finances a blow.

"We have a few full-time employees and we kept everyone employed through the pandemic, so it cost $250,000 to $300,000 to operate in a year we didn't have a festival. But we're very confident we can return to running a profitable festival," he said.

"This festival means far too much to the local community for it not to proceed."

Mr Lenehan also said the festival had been shortlisted for Best Regional Festival at the 2022 Music Victoria Awards, calling it an "exciting" nomination.

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