Indigo Council will get $1 million for the Beechworth to Yackandandah Rail Trail from the federal government, but more ratepayer money will be needed.
Money for safety works was included in a road safety package announced last week.
Councillor Bernard Gaffney, in considering council's financial position, raised the project that is nearing completion.
"At the last council meeting ... we put in an extra $300,000 to prop up the Beechworth to Yackandandah Rail Trail, and it was also mentioned at that meeting that there's still $700,000 which will have to be found one way or another," he said.
"Will that $1.05 million (grant) cover us for the $700,000 that we were going to have find?"
Chief executive Trevor Ierino responded that he and his staff "don't believe so".
"It doesn't replace any works that we would have done anyway, as far as we can tell," he said.
Mr Ierino said it would be up to council in budget deliberations to determine where the $700,000 would come from, when asked by Cr Gaffney.
"It just seems like a lot of money," Cr Gaffney said at Tuesday's meeting.
"We've already spent $5.2 million - I think $1 million of that was ours - and we're about to borrow another million dollars for a mountain bike track."
Councillors later approved a five-lot subdivision a "stone's throw" from the castle house at Mayday Hills, proposed by owner George Fendyk, but an application to confirm use of land for accommodation and events at Mount Ophir was rejected.
Staff advised a certificate of compliance should be refused, on the basis existing use at the Rutherglen estate was not proven satisfactorily, and all councillors followed that advice - although Cr Goldsworthy raised the risk of VCAT.
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Council also refused a planning permit related to recent upgrades at Valentine's Bakehouse in town which involved issues with the heritage overlay.
"We need to refuse this planning permit application, and we need to have some serious conversations with the owners to remediate the area," Cr Goldsworthy said of works done outside of approvals.
Cr Roberta Horne did not believe the owners were intentionally "disregarding the regulations".
Cr Gaffney said complete applications had to be submitted in the case of heritage overlays.
"I also wish them every success, but rules are rules, otherwise we'd just become like Wodonga or Wangaratta and we certainly wouldn't like that," he said.
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