This was the seemingly unguarded response from Treasurer Andrew Constance when asked to weigh into the fraught area of local government reform.

"We have offered up the carrot first up, we're going to have to pull out the stick," he told the audience at a CPA Australia breakfast in October last year.

But what Mr Constance hastily clarified as his "personal view" also inadvertently summed up what many regard as the central difference this election between the two major parties' approach to local government: Sydney is going to have far fewer councils, depending on who wins office in March.

The issue has heavily occupied Sydney's councillors since the state government released a reform package in September, which followed on from a report recommending Sydney's 41 councils be reduced to between 15 and 18.

Most councillors and mayors are vocally against amalgamations, which the government's reform package nonetheless requires them to consider. Both Labor and the Greens are opposed to any push to forcibly reduce the number of councils.

But the electorate's position is far less emphatic.

A Fairfax/Ipsos poll of 1000 voters in November found only 1 per cent said the issue would determine which party they supported.

Almost half – 48 per cent – agree with Mr Constance that there are too many councils, while 45 per cent opposed a reduction.

But views hardened when it came to compelling councils to merge: 54 per cent opposed forced amalgamations, with 40 per cent in favour.

The government's position, by omission, is a notable departure from its platform heading into the last election, when it promised no councils would be forced to merge.

Premier Mike Baird said the state needed fewer councils, adding that forced mergers were "not our plan". "But obviously we need to see what comes forward in terms of local councils," he said.

The government might not be ruling out the stick this election, but it is heavily emphasising the carrot: the $258 million in funding for councils willing to amalgamate voluntarily.

The money, part of a "Fit for the Future" reform package, includes a grant of $10.5 million for any council formed through a merger. Additional funding of up to $12.5 million for every 50,000 residents in each new council over a threshold of 250,000.

Councils have been given until the end of the financial year (and well after the election) to put forward merger proposals, or to justify – against benchmarks including size, financial sustainability and services – why they should not be required to do so.

The proposals are to be assessed by a yet-to-be-assembled expert panel.

The Greens have branded the reforms "forced amalgamation by stealth" because they will financially punish those councils that refuse to merge.

Labor argues there is "little empirical evidence" that larger councils are more efficient than smaller ones, and would put the onus heavily back on those councils wanting to merge.

The party has set out "five key requirements" any voluntarily amalgamating councils will be required to meet, including an independent cost-benefit analysis, community consultation, and commitment that there be no overall job losses or reduction in services.

"NSW Labor will request the Electoral Commissioner to undertake regular reviews of council boundaries and to recommend any minor adjustments which may be required, for example where a new housing development may make a boundary adjustment necessary," its platform said.

What the experts say

ROBERTA RYAN, director, Australian Centre of Excellence for Local Government

This election, the question of whether amalgamations are the "silver bullet" to help underperforming councils achieve this aim is the one issue separating the two major parties.

"The age-old structural reform debate both parties are engaging in this election should be based on an understanding of what communities want from their councils in the future," Ryan says. "And what communities want depends on where they live."

Research by the Australian Centre of Excellence for Local Government found that regional and remote communities were most likely to believe their political representation would be much worse after amalgamation.

But the centre also found most people thought mergers would either improve or make no difference to their feeling of belonging to a local area or their sense of community. Most people felt the same about the effect on services and costs.

"Communities just aren't that fascinated by lines on a map or the old road, rates and rubbish view of the world," Ryan says.

"They want to make sure councils have the capacity to deliver a broad range of services responsive to local needs and preferences."

And achieving this is not as easy as simply merging councils, Ryan says.

GRAHAM SANSOM, chairman of the Independent Local Government Review Panel

Reforming the way local government collects its biggest source of revenue - rates - has been lost in the amalgamation debate, Graham Sansom says.

Sansom, who chaired a independent review of local government, said "we await action" on the panel's proposals that he says would make the rating system fairer and more efficient.  In particular, he says, a promised IPART inquiry has yet to begin.

"Council rates are a tax on property – on wealth – and could contribute to a fairer society," Sansom says.

"But in practice they often increase inequity. Why?"

Firstly, rates are calculated locally.

"In wealthy areas like Woollahra or Mosman residential rates are typically less than 0.2 per cent of land values," he says. "In Campbelltown or Blacktown that figure more than doubles because values are lower – but so are incomes."

Rates are also levied purely on land value.

"So the value of a big apartment block is split between scores of owners and their rates are greatly reduced," he says. "Inner Sydney councils could raise hundreds of millions more if apartments were rated on 'improved' values. They could then fully fund projects like light rail, taking pressure off the state budget."

And finally, NSW has a complex system of rate exemptions and concessions. Sansom says some of these give a "free ride" to landowners who could pay, such as wealthy private schools.

DAVID BORGER, western Sydney director, Sydney Business Chamber

Councils need better leadership, and amalgamations are one way to deliver it, David Borger says.

The former mayor of Parramatta and state Labor MP, who is now the western Sydney director of the Sydney Business Chamber, says mergers – forced ones, if necessary – would help improve the strategic thinking so often lacking in the elected leadership of many councils.

"There's greater scrutiny and accountability if you've only got a few very large councils," Borger says. "The selection process should be more competitive, which should drive better candidates from all sides."

Borger says the annual election of mayors leads to instability and short term thinking, and weakens the role of the mayor in the community.

"Often it's very hard to focus on the big strategic issues and as a result of that it's probably unelected people who make the call on policy matters, or councils often don't have a position it just keeps changing all the time," he says.

Fewer councils should also be accompanied by changes to give the role of mayor greater authority, Borger says, citing examples like San Francisco, where the leader of the council is required to deliver the city's budget.