Residents and hotel operators in the seaside town of Queenscliff are fighting a council's plan to build holiday cabins on one of the state's most prominent sites, overlooking the entrance to Port Phillip Bay.
Queenscliffe Shire Council has won support from the Turnbull government for a $3 million plan to build eco-cabins on parkland beneath Queenscliff's 170-year-old lighthouse.
The cabins would be built on the little-used land surrounding the lighthouse, an area known as Shortland's Bluff.
But a local community association and hotel and bed-and-breakfast operators in the historic seaside town say the plan will ruin what should be prime parkland, and damage local holiday accommodation operators.
The move by the council comes despite a 2014 poll of residents and holiday home owners by planners Planisphere that recorded 70 per cent wanting either improved landscaping on the site, or no change.
Local hotel, holiday cottage and B&B owners say the plan would hurt their businesses, rather than - as the council argues - attract more holidaymakers.
"People thought this was a pie-in-the-sky idea without any money," said David Connoley, president of the Queenscliffe Community Association. "When the federal grant was announced, the reality of it occurring wasn't something we had even contemplated."
Mr Connoley, who lets out a small self-contained cottage in the town, said there were many other places the council could put "eco-cabins".
"It's not eco-tourism, it's a housing development," he said. "And around the lighthouse is such an important coastal open space - Point Lonsdale Reserve, Point Nepean Reserve, there are no other buildings on those other headlands. Why do we need to diminish open space like this?"
The local federal MP for the area, Sarah Henderson, last October announced the funding of $3.5 million for a revitalisation project that included some of the cabins. Residents have written to Ms Henderson, concerned that federal funding for the council-run cabins will see "public money squeezing out private enterprise ??? contradicting Liberal philosophy".
Asked why it had backed building tourist cabins beneath the lighthouse rather than the more popular option of improving the open space, a council spokeswoman said the community's wider needs were considered.
She said the tourist cabins would provide a big boost for the area's economy.
The community survey the council had done was only one source of information, she said. Other sources were consultants hired by the council, a reference group appointed by the council, and a previous lighthouse reserve review recommending development.
Mayor Tony Francis said the council would commission designs for the accommodation and submit a planning permit application.
The eco-cabins would have a "significant economic benefit to the local economy because they would complement other places to stay in the area", the council's statement said.
A design tender for the project will be advertised by the council by May, it said.