“We see Bendigo as part of a much bigger region and we know that some of those smaller councils are struggling financially with their low rate base,” he said.

“Those councils should also have access to sustainable funding so there’s got to be a discussion about how that might take place.”

Cr Cox said he had not contemplated the idea of doing away with rates.

“I think local government needs to retain its independence and by having its own rates system I think it goes a long way to maintaining that independence,” he said.

EARLIER: Debates over rate capping could be a thing of the past if a proposal to change the way local governments are funded gains acceptance.

The chief executive officers of both the Buloke and Central Goldfields shires have called for a radical overhaul of council revenue raising, warning rural shires are financially unsustainable in the longer term.

Central Goldfields Shire CEO Mark Johnston said property rates were “no longer appropriate” as a means of funding councils, calling instead for a greater share of the federal tax dollar.

“We’re not really talking about a local tax, we’re talking about a greater distribution of the global tax collect,” he said.

Councils receive just three per cent of total taxation revenue, excluding rates, while the state government gets 16 per cent and the Commonwealth claims the rest, and Mr Johnston said if that did not change, municipal infrastructure would deteriorate.

“It just won’t be able to be maintained,” he said.

“Councils will run higher deficits and councils will just have to cut back on the range of services they provide.”

Despite the increased challenges faced by small rural councils, Mr Johnston said all non-metropolitan councils would feel the pinch if the status quo remained in place.

“By and large it’s across all councils, as a sector local governments are under increasing pressure to provide a much broader range of services and our financial structures haven't changed,” he said.

“We’re still using a property tax, which is no longer appropriate, so we need to match the income stream to the current-day responsibilities.”

Mr Johnston’s comments come as the Buloke Shire’s Rural Living campaign gathers momentum, with 18 rural and regional councils – including the City of Greater Bendigo – now on board.

Buloke Shire CEO John Hicks said change to the way councils were funded was needed to provide “a livable situation” for small rural municipalities.

“It’s essentially looking for the state and federal governments to agree that all Victorians should be able to access a minimum set of services, no matter whether you live in the country or the city,” he said.

“It’s clearly not the kind of services you’re going to get if you live in Port Phillip or Melbourne or somewhere like that, but a set of minimum services, there should be an entitlement to that.”

Mr Hicks said the diffuse nature of rural populations meant rates were disproportionate to those paid by city dwellers.

“For an $800,000 property in say Stonnington, you’d pay rates of about $900 a year, in Buloke you’ll pay $6990 and you won’t get a patch on the services you’ll get in Stonnington,” he said.

“That’s because it costs so much more to provide services to 6000 people across 8000 square kilometres with 5000 kilometres of roads than it does to provides services to 100,000 people in 10 square kilometres in the city.”

Mr Hicks said he had met with Local Government Minister Natalie Hutchins with a view to forming a working group on the issue, and would be seeking to meet with her federal counterpart and opposition MPs in the coming weeks.

He said the meeting with Ms Hutchins had been positive and also praised larger municipality councils for their support.

“Let’s face it, what’s good for Bendigo is good for Buloke and vice versa, so they’re supporting us in that which is great,” he said.