The council was due to consider a report and make a decision on the future operations of its childcare facility.

The report outlines the growing financial costs of running the centre, which opened in 1976.

The current lease arrangement with Housing NSW expires in December.

An independent rent appraisal for the site identified that it would cost $40,000 per year.

This would increase running costs to $200,000 for the 2015-16 year.

Council's director for corporate policy, Lee Furness said there were several issues to consider in regards to the future operation of the childcare centre.

"The building is ageing and needs major structural repairs within the next five years as well as a lot of ongoing maintenance to ensure it is at the standard required to accommodate childcare services," Ms Furness said.

"The marketplace for childcare providers evolved significantly during the past 40 years and now provides a range of services to the Shellharbour community at competitive rates."

The childcare centre can accommodate up to 39 children per day, with 73 children aged 0-5 years registered to use the facility until the end of the year.

The service also employs six qualified childcare staff and up to 10 staff.

"To make sure there is a healthy provision of childcare services for the community.

"We currently assist three [not-for-profit] long daycare centres to operate from council-owned buildings at reduced rates," she said.

"Staff are aware of the rationale behind the recommendation.

"We will work with them to reduce the impact of any decision of council with every consideration given to their needs."

At last night's meeting councillors were to be presented with three options:

■ negotiating a renewal of the lease;

■ build a new facility to operate; or

■ close the centre if another provider cannot be found to operate the centre, independent of council.

The report was due to go before council at its regular meeting last night.