Sydney looks set to lose a few councils after the tribunal appointed by the NSW government to assess their fitness for the future has found that more than 70 percent of metropolitan Sydney councils don't make the cut.

In June, NSW councils were asked to submit proposals demonstrating their financial soundness and future plans as part of the $1 billion Fit for the Future reform package put forward by the state government. The Independent Pricing and Regulatory Tribunal (IPART) assessed the proposals, and of the 38 submitted, deemed 29 "not fit." 

To be assessed as fit, "councils must have demonstrated they have sufficient scale and capacity and are financially sustainable." Most of the proposals were rejected on the basis of not having sufficient scale and capacity despite being financially sound.

The Independent Local Government Review Panel has suggested that the number of councils in metropolitan Sydney should be reduced to 18 or less, and all councils across the state were strongly encouraged to form merger proposals. 

Despite being financially sound and meeting the scale and capacity criteria, the City of Sydney was declared not fit. The report states that when measured on its own, the council would be declared fit, but when compared to the Global City Council merger option—the creation of a Global City Council that incorporates the City of Sydney, Randwick, Waverley, Woollahra and Botany Bay—it doesn't make the cut.

"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," said City of Sydney mayor Clover Moore.

The councils have a 30-day period to respond to the IPART findings.