Give councils £246m loan to fund mergers, says report
It is "unrealistic" to expect councils to find the £246m upfront costs of merging them, a committee of AMs has warned.
Ministers want to begin the process of reducing the 22 councils to eight or nine after May's assembly election.
The local government committee has urged the Welsh government to consider lending councils money for the mergers.
Ministers said options to pay for mergers include using reserves or other "borrowing approaches".
Merger plans have had a hostile reception from political opponents and some Labour council leaders.
An assessment for the Welsh government of how much local authorities would need to spend preparing for mergers in 2019-20, the year before new authorities would be established, puts the costs at between £54m and £90m.
The total cost of the merger process, from 2019-20 to 2023-24, is estimated to be between £97m and £246m.
The Welsh Local Government Association has warned it would be "impossible" for councils to meet the costs of mergers without significant cuts to services.
The committee's report, published on Wednesday, said: "While we recognise the potential for savings in the medium to long term, we consider it unrealistic to expect authorities to meet the upfront costs without any assistance from the Welsh government."
The report said the committee was "pleased to hear" Public Services Minister Leighton Andrews would "not rule out" giving councils repayable grants.
"While this may not be the preferred solution for local government, we believe it would be more acceptable than the current position and a positive step forward," the report said.
The Welsh government said: "The minister for public services has previously highlighted the net savings of up to £650m over 10 years which would arise from mergers.
"He has made it clear that there are a number of routes open to local authorities in paying for mergers including using reserves, invest-to-save and other borrowing approaches."