The Local Government Association of Tasmania (LGAT) has defended its record after a report by the state’s Auditor-General found a majority of councils were financially unsustainable.

Blake said 12 councils reported a deficit for the past three years, including Hobart, Glenorchy and Devonport.

Of the 17 with deficits, five were found to have budgeted for an operating deficit before capital grants. Another five budgeted for an overall deficit, irrespective of additional capital grants.

"This position cannot be sustained over the medium to long term and action is needed to increase revenues or reduce costs to the point where all costs are covered from normal operating revenues," Blake said.

"To ensure long-term financial sustainability, we would expect a council, as a minimum, to budget for a break-even operating result before capital grants, contributions and revaluation increments."

“Councils continue to actively explore opportunities for improved efficiencies through resource sharing (staff, systems and equipment) and some are discussing opportunities that voluntary mergers might provide for improved long-term sustainability.

“It is the goal of those in the sector to ensure cost effective and sustainable services with no single generation wearing a disproportionate cost burden.”