The New South Wales Government has made it clear that forced local government amalgamations are now on the table, after a report found that nearly two-thirds of the state's councils are not "fit for the future".

The Independent Pricing and Regulatory Tribunal examined 139 proposals from 144 councils to either merge or standalone.

It found only 52 proposals meet the criteria set up under the State Government's "fit for the future" local government overhaul.

Four of the proposals that were deemed "fit" were from councils willing to merge, while 48 were for councils who want to remain independent.

NSW Premier Mike Baird said councils now have 30 days to respond to the IPART report and he hoped many would volunteer to merge during that time.

But he said the Government would consider all options, indicating it is willing to try to force mergers if necessary.

"I certainly think that we have come to the end of the road in many respects," Mr Baird said.

"Obviously we will have to consider our options at the end of the 30 days if councils haven't participated.

"But our strong preference at this point remains for councils to do what is right for the people of this state."

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Mr Baird said IPART had found that local government mergers could save ratepayers nearly $2 billion over the next 20 years, which could be used to cut rates or provide better services.

In the Hunter region, Newcastle, Lake Macquarie, Maitland and Dungog were deemed "unfit", but Singleton and Cessnock were considered "fit" and would not face a merger.

In the north of the state, the Tweed, Kyogle and Clarence Valley councils fell under the "unfit" category, while the Byron, Ballina, Lismore and Richmond Valley councils were approved as "fit".

In the central western region of NSW, 15 councils were deemed "unfit" by the report and would face mergers.

Mergers that were given the tick of approval, include the amalgamation of Auburn, Burwood and City of Canada Bay councils and a merger between Randwick and Waverly councils.

In regional NSW, a merger between Young and Boorowa Councils and another between Cootamundra and Harden shires were also assessed positively.

Councils that were deemed "fit" to remain standalone include Bankstown, the Hills and Wollongong City councils.

Only seven councils in the Sydney metropolitan made it into that category.

Most met the financial criteria set out by the State Government, but failed to meet the scale and capacity criteria under "fit for the future".

IPART noted that the City of Sydney Council received the highest number of public submissions during the assessment process, with the majority supporting a standalone council.

However, despite finding that the City of Sydney met the financial criteria to remain standalone, IPART concluded that it did not have meet the scale and capacity criteria to be a "Global City Council".

Sydney's Lord Mayor Clover Moore said the said findings were contradicted by the council's performance.

"Over the past 10 years, the City has consistently delivered debt-free budgets, kept residential rates among the lowest in Sydney, and delivered high-quality infrastructure needed by our community and the 1 million visitors to the city each day," she said.

"To say the City of Sydney is somehow unfit in the face of this strong evidence to the contrary makes a mockery of the entire review process, and throws into question all decisions made as a result."

Cr Moore said forcing the City of Sydney to amalgamate could threaten a multi-million-dollar infrastructure plan.

"The impact of a forced amalgamation now would risk our 10-year, $1.94 billion infrastructure program as well as $30 to $40 billion worth of private development over the next decade," she said.

'IPART process was farce': Save Our Councils

Phil Jenkyn from the Save Our Councils Coalition said the whole process was reverse-engineered by a Government which had already made up its mind.

"The whole IPART procedure is a farce," he said.

"They were controlled by the dictates and terms of reference of the Government. It has done what it was told to do.

"We totally reject this whole process, we will not be part of it, we will fight this Government and we will win ... including in the courts."

The Premier would not be drawn on how many councils he wanted to see merged, or whether forced amalgamations would be achieved through legislation or an application to the Boundaries Commission.

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But the Government would face a massive hurdle if it tried to put legislation through the Upper House, with Labor and the crossbenchers who hold the balance of power, vowing to block any forced amalgamations.

"Every politician in the Parliament except the Coalition is saying this is a sham and they won't support increased legislative powers for the Government," Greens MP David Shoebridge said.

"We call on the Premier to review this steamrolling campaign," Christian Democrat MP Fred Nile said.

Shooters MP Robert Brown also expressed opposition.

"What communities want they should be entitled to have and that is not being forced by governments to do things that aren't in the interests of local communities," Mr Brown said.

"There is no reason, financial or otherwise, to do any of this."

Labor spokesman Peter Primrose said forcing councils that were deemed financially unfit to amalgamate made no sense.

"What you're going to end up with under that process is with a larger unfit council," he said.

"It's like having two drowning people and the Premier's solution to save them is for them to both hold on to each other and somehow that's going to stop them from drowning."

Some councils were already firing warning shots back at the Government.

"My community will not be bullied," Tom Sherlock, from Mosman Council, said.

"We have a local democracy, we are proud of our local democracy and we will not let it go just at the dictate of an undemocratic local government."

In providing proposals to IPART, councils were required to consider merger options put forward by the Independent Local Government Review Panel in 2013.

However, some also put forward alternatives, which were also assessed.

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