Warwick Bennett said he was disappointed that the council was overlooked in the government's Safe and Secure Water Program.

It applied for $1.25 million of the $5m needed to upgrade Goulburn's water treatment plant and $2.25m for the city's $9m water re-use scheme, pumping highly treated effluent onto parks and sporting fields.

"Our concern was that halfway through the process the government changed the goalposts and directed money to drought affected communities where water supplies were not meeting health standards," Mr Bennett said.

"That is perfectly acceptable and understandable to us because they should be a priority, except that when the announcements were made, there were a lot of projects approved that were contrary to that principle."

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The GM cited $3m granted towards a $12m sewage treatment plant at Queanbeyan and $75,000 for a scoping study for a water treatment plant at Bega. Nelligen also scored $3.5m of the $14m needed for a water supply and sewerage scheme upgrade. Mr Bennett argued those communities were no more in need such funding than Goulburn Mulwaree.

He and Mayor Bob Kirk took up the matter in a recent meeting with Jim Bentley, the Department of Planning, Industry and Environment's Water CEO. They pointed out that the council had funded its $35m wastewater treatment plant without State money and had devoted $5m to a water supply improvements over the past five years.

"We thought in terms of fairness and equity that we deserved some help (with the current projects) but the bureaucrats do not agree," Mr Bennett said.

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They were informed the decision was final. Department officials did however ask the pair to give advice to drought-stricken communities on how the council secured political support for the Highland Source Pipeline. Though "surprised," they have committed to doing so. Mr Bennett said the most important pieces of advice were "be courageous and take the community with you."

"I believe the council's decision to build the pipeline was one of the best and most proactive ones ever made and that is borne out by the fact that water supply is sitting at about 70 per cent," he said.

At the end of August, usable supply was sitting at 68.6 per cent and Goulburn drew 7.35 megalitres from the Highland Source pipeline, a council report stated. Under the agreed pumping regime, Goulburn can draw a maximum 5.5 megalitres per day.

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But Mr Bennett said the community was still being very responsible with water use and there was no need to draw more from the Wingecarribee Reservoir at this stage.

Now the council will completely fund the water treatment plant upgrade and re-use scheme itself. This was already budgeted and grants would have been "a bonus." The GM said the water and sewer funds were in healthy positions.

The council will however apply for a State subsidy towards an estimated $8m upgrade of Marulan's wastewater treatment plant. A scoping study has been completed. Tenders for the design will be called towards the end of the year.

The Post has requested comment from Water Minister Melinda Pavey's office.

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