STATE and federal governments must step in to help NSW councils, which are at ``financial breaking point'', the Local Government Association has said.
And half of greater western Sydney's councils have policies which are ``financially unsustainable'', according to an independent report.
The findings of council monitor FiscalStar, published last week, were based on 2006-07 statutory financial reports on council websites.
Of the 14 councils in greater western Sydney, seven were named financially unsustainable, meaning substantial changes to financial and infrastructure policies seemed inevitable.
Hawkesbury, Blue Mountains and Penrith were given this rating.
The report said some of Sydney's councils were so strapped for cash they would have to increase rates by 200 per cent over the next decade.
Out of the 100 largest local councils in NSW, 35 will have to increase rates, fees and charges by 80 to 200 per cent over the next 10 years and another 19 councils will have to increase by 60 to 80 per cent, to address their financial woes.
FiscalStar said while the financial viability of councils was not in doubt, ``the stability and predictability of the council's rates, fees and charges are...at risk, and its ratings burden does not seem to be shared fairly between the councils.''
It said the state and federal governments needed to come to the councils' rescues with increased grants funding.
Minister for Local Government Paul Lynch said residents would be protected from uncontrolled rate rises through a rate-pegging policy.
``Councils applying for special rate variations have to present a business case and secure the support of their communities for a rise in rates,'' he said. ``The Iemma Government is also working with councils to promote financial sustainability. These reforms will assist councils better manage their assets and infrastructure and plan for the future.''
Association president Genia McCaffery said the problem was with rate pegging: ``It hampers councils' ability to set rates according to local needs.''
``How many more reports, findings and data have to be released saying the same thing before governments sit up and listen? Councils are at financial breaking point.''