The draft report released Wednesday makes 41 recommendations and sets criteria that would see some municipalities subject to a viability review. That would happen if the municipality experiences three consecutive years of fiscal difficulties as measured by a financial condition index. That index would measure performance in areas such as revenues, budget deficits and capital assets.
Municipal Affairs Minister Mark Furey couldn't say whether any municipalities would be forced to merge as a result of the recommendations.
He said it isn't the government's intent to dictate the issue.
"It would be premature for me to speculate," said Furey. "This is going to generate greater discussion and greater focus on the structure of municipalities."
But Dave Corkum, the president of the Union of Nova Scotia Municipalities, said future mergers could well happen under the recommendations, although he couldn't say how many municipalities would eventually be affected.
Corkum, who is the mayor of Kentville, said anywhere from five to 10 municipalities are now facing "challenges."
"Somewhere along the line there has to be a situation where you've got to be able to turn things around," said Corkum.
He said if the recommendations are adopted, there is "a good chance" there would be fewer than the current number of 54 municipalities within a decade.
Financial difficulties due to a poor economy and a declining population have already caused town councils in Springhill, Hantsport and Bridgetown to vote to dissolve and seek amalgamation with neighbouring municipalities.
The report says incorporated villages should be phased out, while existing villages should be given the opportunity to apply for town status, merge with an adjacent town, or dissolve into their encompassing rural municipality as they see fit.
It also calls for several tax and program changes, which the Municipal Affairs Department says could put an extra $21 million in municipal coffers.
Those changes include reviewing legislation to provide municipalities with broader authority to establish fair and effective property taxation and revenue regimes, along with the introduction of a provincial property tax rate to be applied to all taxable property.
The report also calls for the development of a new unconditional operating grant to replace the equalization program.
Furey said he is open to a number of the initiatives, including revamping some taxes.
"We're open to any discussion that can find solutions that are workable for both municipalities and the province," Furey said.
Furey said there would be a series of four public consultations on the report to be held later this month and municipalities would then have until Dec. 15 to reply in writing.
He said he expects some action would begin on various recommendations early next year.