The New South Wales Local Government Minister says the number of councils looking for rate rises is evidence that reform is needed.

Last week, the Independent Pricing and Regulatory Tribunal (IPART) signed off on 21 special rate variations, after almost a third of the state's councils asked for rate increases.

Local Government Minister Paul Toole said the call for rate rises showed councils needed help to improve their financial sustainability of councils.

“It highlights change is needed in New South Wales to ensure we have a stronger and more modern system of local government,” he said.

But the Minister would not give any more word on the fate of councils found ‘unfit’ for the future.

A majority of NSW councils have just a few weeks to tell to the Government they want to stand alone, merge or be part of new ‘rural council’ authorities.

So far, most have opted for the ‘stand alone’ option.

In an interview for the ABC this week, Mr Toole would not say what will happen to ‘unsustainable’ councils the do not take up reforms.

“We need to see what those submissions are actually going to look like,” he said.

“IPART is going to act as the expert advisory panel.

“We've also got John Comrie, who's a local government expert from South Australia who's going to sit at the side of IPART to be able to assess those submissions, and by the end of October, they'll be coming back to government about whether they're fit or not fit.”

Mr Toole said some councils could retain their independence through the Fit for the Future reforms, and there are smaller changes that may make the local government sector more sustainable.

“There's a lot of other things within the recommendations that were put forward that the government is continually working on changing and improving,” Mr Toole said.

“Things like two year terms for mayors, it's looking at writing parts of the Local Government Act again, the creation of a state financing authority.”