Extensive reforms are necessary to keep NSW councils effective, but amalgamations won't be forced, a review panel says.
The Independent Local Government Review Panel says in its final report that some amalgamations must be considered, but they "are not a panacea for local governments' problems".
"No change is not an option," panel chair Professor Graham Sansom said on Wednesday.
"Already too many councils face serious financial problems. Far-reaching reform is essential to make NSW local government sustainable and fit-for-purpose," he said in a statement.
"We have respected the government's policy of no forced amalgamations and suggested various ways to promote voluntary mergers."
The 152 councils across the state spend about $10 billion annually and employ 50,000 people.
But it's no longer possible to support this many councils, Prof Sansom said.
"The evidence also shows that properly planned mergers in the right places can bring great benefits," he said.
While neither the NSW government nor the panel support forced amalgamations, Prof Sansom's group did recommend the establishment of an independent boundaries commission.
And it believes options to reduce the number of councils across Sydney to between 15 and 18 should be examined.
"Possible mergers must be considered through impartial and careful consideration of the facts," he said.
The panel also recommended a "joint organisation" to help co-operation between councils and state government, greater financial oversight, redefining the roles of mayors and councillors and establishing rural councils in sparsely populated areas.
Local Government Minister Don Page said councils would be consulted about any possible changes.
"Some ideas in the reports will require careful consideration and development. We need to take the time to get this right," he said.
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