In addition to the LGAs, there are also 10 small islands and ski resorts which are unincorporated areas and administered either by the state or management boards. Council elections are held every four years on the fourth Saturday in October.
The last council elections were held on 22 October 2016. Election was not held for Geelong, which has been under administration since 2016. 637 local councillors were elected in the 78 councils contested.
Local government had existed in Victoria since before its separation from New South Wales in 1851. The Town of Melbourne was established by an Act of the NSW Governor and Legislative Council in 1842 and the Borough of Geelong was established in 1849. Both bodies continued after the creation of Victoria as a separate colony, and both later became cities. Road districts were established under legislation passed in 1853. From 1862 many road districts became shires pursuant to the District Councils Bill 1862. To become a shire, the road district had to be over 100 square miles (260 km2) in size and have annual rate revenue of over £1000. There were 96 road districts or shires created by 1865. The first Victorian general Act dealing with local government was the Local Government Act 1874, which empowered shires to be established in territories that could financially support them, and boroughs to be established in areas not exceeding 9 square miles (23 km2) with a population of at least 300. Promotion to town or city status was dependent on the gross revenue of the council. Such promotion was not automatic, but it was granted often.
Local government has been referred to in the Victorian constitution since 1979 (sec. IIA), but it does not operate so as to make Victoria a federation or protect the borders or powers of local government from amendment by executive order or act of parliament. Today, the constitution recognises it "a distinct and essential tier of government" and prohibits a council being dismissed by executive order, but grants significant powers to the state parliament in respect of local government. The clauses have been amended many times by parliament, but since 2006 the Constitution Act has required a referendum to further alter them.
The current Local Government Act dates to 1989 and eliminated administrative distinctions between cities and shires, introduced the category of rural city and removed the possibility of declaring any further boroughs or towns (existing boroughs and towns were retained, although only one, the Borough of Queenscliffe, remains today, the others being abolished with the 1994 restructure). Five shires became rural cities but were dissolved with the 1994 restructure.
In 1992 there were 65 cities in Victoria, more than there were in England at the time despite a significantly lower population. In 1994, the Jeff Kennett government restructured local government in Victoria. His reforms dissolved 210 councils and sacked 1600 elected councillors, and created 78 new councils through amalgamations. In suburban Melbourne 53 municipalities were reduced to 26. The new local government areas (LGAs) were headed by commissioners appointed by the State Government, democratically elected councils did not return until 1996. The current total of 79 LGAs arose when the Shire of Delatite was split in 2002 into the Rural City of Benalla and the Shire of Mansfield. A new City of Sunbury was proposed to be created from part of the City of Hume after the 2016 council elections, but this was abandoned by the Victorian Government in October 2015.
All local government areas (i.e. cities, rural cities, shires and boroughs) are governed in a similar fashion, with an elected council, one of whom is the mayor (in shires the mayor may use the title "president"; the City of Melbourne has the title "lord mayor"). The City of Melbourne and the City of Greater Geelong have a directly elected mayor, whereas other councils elect a mayor from one of their number. Some LGAs are divided into wards for the purpose of electing councillors; where a ward elects a single councillor, it is by preferential voting; and where it elects multiple councillors, it is by proportional voting using the Single Transferrable Vote. Voting is in all cases compulsory for enrolled voters and elections for all councils now happen on the same day every four years—on the last Saturday in November two years after state parliamentary elections.
The average area of a municipal district within the Melbourne metropolitan area is 285 square kilometres (110 sq mi); the average area of the remaining municipal districts is 4,545 square kilometres (1,755 sq mi). Despite this area being comparable to the average area of a US or English county, there are no administrative subdivisions such as American towns and cities or English parishes; suburbs (a part of an urban area), towns and rural districts, although legally defined, have a purely geographical existence.
According to the Local Government Act 1989, the term "city", must be used for a municipal district which is predominantly urban in character; "rural city" must be used for a rural district which is partly urban and partly rural in character; and the term "shire" must be used for a municipal district which is predominantly rural. In practice, this is understood as referring to the population distribution between urban centres and rural areas. The term "borough", used of the Borough of Queenscliffe, is not defined by the act but has been retained for the single borough which survived the reforms of the 1990s. Under the repealed Local Government Act 1958, boroughs, towns and cities were defined on the basis of area, population and rateable property. In practice, boroughs were and are small towns.
Thirty-one of the municipalities form the Greater Melbourne area, each being wholly, or partly, within the Melbourne metropolitan or urban area. All Melbourne suburbs lie within these municipalities. The outer of these municipalities such as Cardinia Shire and Yarra Ranges Shire have much of their area outside Melbourne's urban area. Greater Melbourne and regional municipalities are sometimes treated differently by state government legislation, for instance the Public Holidays Act permits non-metropolitan councils to replace Melbourne Cup Day with a local public holiday.
In addition to the LGAs, there are also 10 small unincorporated areas within the state. These comprise coastal islands and several ski resorts. The coastal islands are:
These unincorporated areas are directly administered by the state.
Six alpine resorts are excised from the surrounding shires by declarations made under the Alpine Resorts Act 1983 and administered by alpine resort management boards established under the Alpine Resorts (Management) Act 1997. Unlike local councils, these boards are fully appointed by the state government but fulfil similar functions. The territories managed by them are considered to be municipal districts for the purposes of the Emergency Management Act 1986 and the Environment Protection Act 1970, but not generally. The ski resorts are:
They are rarely included in lists of local government areas and are not considered to be LGAs by the Australian Bureau of Statistics, with their population included in the unincorporated areas section of such lists, but are occasionally listed alongside municipalities.