The impact of coronavirus will leave Indigo Council with a cash deficit of $1.09 million for the 2020-21 financial year.
Councillors will consider the shire's draft budget when they meet for Tuesday's meeting.
The budget includes a 2 per cent rise in rates, in line with the Victorian government's rate cap.
Staff decreased the capital works budget by $70,000 to $10.78 million because of the coronavirus pandemic.
Spending includes a $200,000 fighting fund for a business recovery strategy to assist with the post COVID-19 economic recovery and $2.1 million for the Beechworth to Yackandandah rail trail which includes a $1 million government grant.
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In his report to councillors, finance and risk manager Phil Garoni said the council was in unfamiliar territory.
"The impact of COVID-19 on the economy and the true extent of the economic fall-out has created a very challenging environment in which to prepare a 12-month budget based on any real certainty," he said.
"Due to the uncertainty, there will need to be ongoing monitoring and adjustments made to the budget over the next 12 months.
"Any easing of restrictions earlier than anticipated may have a positive impact on the budget meaning some assumptions about lost income may not be realised.
"If however, there are further outbreaks and harsher restrictions are put in place by the state, council's financial position may be more negatively impacted."
Indigo's council meeting with be held on Tuesday from 6.30pm via Zoom and will be broadcast on the website.