A Trafalgar South farmer declared at last week's rally he would not pay the levy portion of his rates.
However, Cr Adam Sheehan advised "ratepayers will simply not have a choice."
"The Victorian government is forcing the hand of local councils to collect monies on its behalf and has left no stone unturned in making sure the Allan Labor Government gets a grab of your money, whether you like it or not," Cr Sheehan said.
Malcolm Dodson, who has a 360 hectare beef property at Trafalgar South described the levy as a "money grab."
He said he intended to pay his council rates when he received his rates notice but would not pay the levy portion - "and I'll be lobbying for others to not pay it too."
Cr Sheehan said he had spoken to many residents who could not cannot afford the levy and were seriously considering refusal of payment.
However, based on legal advice provided to council, he believed this was not possible.
"The State Government has been very efficient - with the worst intentions, I might add - in locking this up in such a way that ratepayers will simply not have a choice," he said.
According to advice, Cr Sheehan said a council refusing to collect the ESVF could result in the state government obtaining a court order to compel the legislative duty.
In addition, council cannot issue a separate invoice for the levy.
For ratepayers refusing to pay, they will be subject to third party debt collection at council's cost.
If less than the aggregate of rates, charges and levy is paid, council must proportionally allocate money paid to the levy.
"This is irrespective of whether the ratepayer has expressly indicated that they do not wish to pay any part of the levy," Cr Sheehan said.
Resident Gerry Prestney used community question time to pose five questions on ESVF and its collection.
In response, interim chief executive officer John Bennie reiterated the state government's expectation that councils recover any outstanding ESVP amount from ratepayers through debt collection processes.
"This may include the application of interest charges or initiating court action," Mr Bennie said.
He said council was collecting the levy and remitting it to the state government but "there is no dedicated funding provided to cover the increased administrative duties."
"The associated costs of collection will currently be borne by council," he said.