Rob Spence, the CEO of the Municipal Association of Victoria, said the Government was supplementing councils to get them through the next four months but a long-term fix was not in sight.
"We're still miles away from the final solution on this, so this is a massive effort to get this sorted out," he said.
"We need to really get on the bike and get moving. This is a really complicated exercise because each council has different contractual arrangements with different recyclers.
"I've been around the bureaucracy since the beginning of time, almost, and this is as complicated an issue as I've ever seen."
Mr Spence said if there was no way to address the increased cost of dealing with the waste, ratepayers would be forced to cover it.
"We've got a mass of contracts that need to be worked through and systematised in some way that effectively deals with the pricing issue," he said.
Up to councils to find solution, Government says
Environment Minister Lily D'Ambrosio said the money would give councils, and their contractors, time to develop solutions and renegotiate contracts.
"The money is there to help ensure that kerbside collections continue, and that the materials that are collected are processed," Ms D'Ambrosio said.
"It allows councils ... to have the opportunity to negotiate with their contractors, whether it be the kerbside recyclers or the end processors, to come up with realistic contract arrangements that actually stabilise the collection system into the future."
Ms D'Ambrosio conceded it could have been dealt with before the State Government needed to step in.
"I think it's probably fair to say it's an issue that could have potentially required earlier consideration," she said.
"However, what we're doing now is providing that assistance.
"We certainly expect that councils now take the opportunity, that we're allowing them through this short-term support, to be able to respond fully and adequately to do the job that they do in managing the recycling collection."
Ms D'Ambrosio said the industry was working to upgrade its infrastructure and systems to meet China's new requirements but it would take time.
The State Government also announced a taskforce would be established to help the industry adapt to the new landscape which doesn't include sending rubbish to China.
