An independent report from LSI Consulting shows the council accumulated losses year-on-year since the 2016 Fit for the Future merger between the old Armidale Dumaresq and Guyra Shire councils.

The results come as no shock to ARC interim-administrator Viv May, who was installed in June after councillors were booted due to months of infighting.

"You can't put two financially-strained and under-performing councils together and expect a miracle," Mr May said.

"However, council is adopting a greater focus on sensible spending of public money that will, in time and in combination with the cost-efficiencies of a larger council, help to ensure the merger is a success."

In September, an ARC audit revealed an $8 million discrepancy in funds. Ratepayers now face a proposed permanent special rate variation (SRV) of 18.5 per cent, plus a 2 per cent rate peg to start in the next financial year.

Either that, or an 8.5 per cent SRV plus 2 per cent rate peg, all complicated by a temporary 10 per cent SRV approved by the former Armidale Dumaresq Council that is due to expire at the end of the financial year.

The state government-imposed merger was fiercely opposed by the Guyra community, which held numerous rallies against it.

Fit for the Future involved the forced amalgamation of 20 councils that, according to the LSI report, recorded a $1.03 billion operating loss, excluding grants, between 2016 and 2019.

Northern Tablelands MP Adam Marshall called the entire policy "a sham" for promising savings that could never have been realised.

"The Fit for the Future exercise was an abject failure, not just here but everywhere," he said.

"You can't fix the failings in local government, or the balance sheet, simply by taking one broke council and merging it with another.

"You just have a larger, financially stressed or broke council unless you fix the underlying financial issues that underpin local government and that was the argument at the time."

Mr Marshall said that unless issues with cost-shifting, rate structures and a "perverse" financial assistance grant process were fixed, the issues would be reoccurring.

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He argued that ARC would need to make a strong case to the community for the rate rise to push it through the Independent Pricing and Regulatory Tribunal.

Before the 2016 merger, the former Guyra council had been granted its own permanent 5.7 per cent rate increase.

Mr May questioned whether even that would have allowed the council to deliver just "bread and butter" actions.

"Aided by the renewed focus on sensible spending and cost efficiencies, the merger will bring considerable benefits to our regional community as we emerge from the added challenges of severe drought, fire and the COVID-19 pandemic," he said.