At the NSW Local Government conference Premier Mike Baird told representatives of the state's 152 councils to put "pride in the back seat", suggesting amalgamations may become a reality.

Cr Smith said the funds on offer wouldn't go far in covering merging costs, whether it be aligning rating systems, redundancies or other organisational costs.

"(Amalgamations) are not cheap."

The Fit for the Future plan identifies councils with a population of less than 10,000 as unviable.

"The government have plucked this magic figure out of the air," Cr Smith said.

"Our first position is to reject amalgamations, but if the state government is going to force amalgamations, we're going to need a plan B and C.

"We're not going to put our head in the sand.

"We would be foolish to not be talking to our neighbours in the region," he said.

Cr Smith's comments come as Cootamundra mayor Jim Slattery declared Harden Shire as a preferred merger partner.

In the initial independent review of local government documents, it was recommended Junee and Cootamundra merge.

Cr Smith said some preliminary discussions between other councils in the region had taken place, with a focus on finding like-minded councils of a similar size.

He said councils who don't merge would be defined as "rural councils" which could force significant financial restraints on them.

"If you fit into a rural council you don't get cheaper loans from state treasury and a whole heap of other things ... it's setting them up to fail," he said.

Cr Smith said setting up financial constraints on councils would become a self-fulfilling prophecy.

Next week, Cr Smith and council's general manager James Davis will be meeting state government representatives in Sydney to help define what a rural council is.

"It will be an interesting meeting."