Councillor Mark Rodda said the dam plan is "doomed and I don't believe the government should be wasting any more time trying to breathe life into the project".

"They should be looking urgently at the alternatives, which is to complete the pipeline to the current Dungowan Dam and to mitigate the expense of the safety upgrade of the current Dungowan Dam; to direct those funds into that project," he said.

"As well as the most important part of it all, investing in cutting edge industrial-quality water recycling infrastructure."

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Cr Rodda said the state could also reconsider options like water buybacks, or a pipeline to Keepit Dam, or tapping into the great artesian basin.

"I think give up and do something else," he said.

Cr Rodda said a long-awaited Infrastructure Australia report published on Wednesday put the final nail in the coffin of the 22 gigilitre project.

The report by the independent Commonwealth agency found there was "insufficient evidence" that the dam project was the best approach for guaranteeing the city's water security. It didn't recommend putting the dam on its list of priority projects. The project would deliver just 10 cents value for every dollar spent on it, the report said.

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Federal water minister Tanya Plibersek - who would need to cover half the cost but has yet to sign up to the plan - told media last week she was awaiting the assessment before making a decision on the future of the project.

But despite the criticism, the Tamworth councillor was the only local leader urging a rethink on the billion-dollar plan.

Tamworth mayor Russell Webb said he wasn't surprised, but was disappointed, by the report's findings.

He said he had "very little confidence" that the project will ever actually get built.

"There doesn't seem to be any appetite towards building a new dam," he said.

"There is an appetite for other solutions.

"What hasn't been taken into account, in my mind, is that the other solutions, whilst they may be more affordable, all have problems, all are problematic in some way or another."

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If the project does fail, he said a plant to treat waste water for use in the city's huge industrial sector would be the best plan b.

Cr Webb said buying back water licences would impose a "massive negative impact" on the irrigation industry, and a direct economic loss on the community, by robbing the businesses that serve the sector. And recycled drinking water would just be too unpopular, he said.

"My perspective and the council's position has always been we wanted the dam. If the dam's not going to happen then we want the water security issue fixed for our area," he said.

"And however they fix that, that needs to be in line with community expectations.

"Potable reuse of water isn't going to get a guernsey in Tamworth."

Tamworth MP and water minister Kevin Anderson remained firmly in favour of the dam on Wednesday.

"The new Dungowan Dam is the best option for Tamworth," he said.

"A vibrant, liveable Tamworth needs Dungowan Dam."

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Local group the Tamworth Water Security Alliance also believe it's time to move on from what they called the distraction of a prohibitively expensive Dungowan Dam.

Alliance member Graham Carter said there needed to be "serious economic analysis and genuine consultation on all options available to secure Tamworth's water supply".

"Fixing the existing Dungowan Dam, building stage two of the pipeline and setting up recycling of all industrial water should now be the top priority as a way forward," he said.

"These are solutions that we have been advocating since day one."

Alice Milson said the council should make using recycled water a "top priority".

"It's time for the Council to step up and lead the community. The concentration on Dungowan Dam for the last three years has lost valuable time in educating people about better water saving options," she said.

"We are now back to the drawing board and need a business case that considers purified water recycling, stormwater harvesting and more rainwater storage. All common-sense solutions".

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