There are fears the community will not get the final say on what happens to Newcastle's heavy rail corridor, if an administrator is appointed ahead of a proposed council merger.

The NSW Government has delayed a decision on the possible merger of Newcastle and Port Stephens councils, while it investigates an amalgamation between Dungog and Port Stephens.

In the meantime, UrbanGrowth NSW has lodged a rezoning proposal, meaning buildings could end up on the former rail corridor.

In December 2014, Premier Mike Baird gave the community an assurance about the rail corridor.

"The corridor, where the heavy rail is, we are saying that is going to be the council's responsibility," Mr Baird said.

"In the sense, they must tick off and sign off on anything that goes into that corridor."

But Newcastle MP and councillor Tim Crakanthorp fears council will soon be sacked, and the decision will be made by a Government-appointed administrator.

"Newcastle Council won't actually be there with the proposed amalgamation with Port Stephens, and the Government will be able to prove its own plan," he said.

"Baird said that the community would have the final say on this.

"But if the council is sacked, then it will come down to a Government-appointed administrator, so I have deep concerns.

"Time will tell. However, it doesn't bode well at this point."

The Premier and the Planning Minister have been asked to comment.