A funding crisis could force councils to cut bin collection services and community events, Stormont has been warned.
Northern Ireland's 11 councils are to meet with ministers and MLAs this week to demand an urgent rescue package.
The meeting will be the first proper gathering of the Partnership Panel, which connects the Assembly with local councils, in almost four years.
The agenda is likely to be dominated by discussion of how town halls can manage the impact of the coronavirus pandemic.
"Financially for councils, this year is a write-off," the Northern Ireland Local Government Association (Nilga) warned ahead of this week's meeting.
"Local government finances have been devastated by Covid, continued income losses and the non-payment of rates.
"Income streams are drying up, car parks are not busy and leisure centres can only offer restricted numbers."
In a report written ahead of the upcoming meeting, council chiefs said that the situation was grave and would deteriorate further without additional assistance.
"Unless financial support is forthcoming this financial year (which ends in March) and there are guarantees around future rates income for two years, we will have to consider significantly reducing services such as waste collection, community events and local development economic projects."
In July Agriculture Minister Edwin Poots and acting Communities Minister Caral Ni Chuilin earmarked £11m to help councils cushion the blow of the pandemic.
But town halls have now said that further funding is "desperately needed before (property) rates are proposed, let alone struck".
"Even before the Covid crisis hit, we were beginning to see city and town centres decline across the board," the Nilga report added.
"During Covid many organisations have had a rethink about whether they need a lot of premises they are paying rates on.
"Council reserves are absolutely depleted. Trying to agree a multi-year budget for councils may be a challenge for Stormont."
Sinn Fein MLA Ms Ni Chuilin said she hoped the upcoming meeting would allow the parties to "discuss how we can continue to work together for the benefit of everyone, particularly in the social and economic recovery from Covid-19".
"It will provide an opportunity to consider joint policy design on key issues of public concern and will improve coordination between departments and councils," she added.
Nilga president and Belfast councillor Matt Garrett said he hoped that an agreement on finances could be struck.
"(The meeting) offers a real opportunity for building on collaboration and joint working between councils, Stormont and our community during the pandemic," he added.
While the Partnership Panel continued to meet during the three years of Stormont's collapse, it was unable to operate properly.