The NI Local Government Association has said councils are losing £10.5m a month at a time of extra cost pressures.
SDLP councillor John Boyle says Derry City and Strabane council could be financially insolvent by the end of the year.
The city’s former mayor said several revenue streams had stopped due to the pandemic and reserve funds were “dwindling”.
The NI Local Government Association (NILGA) said councils had invested £40m in the Covid-19 response and their rates income could be down by a quarter this financial year.
The umbrella body called for national, Stormont and local government to come together as “one public purse”.
Cllr Boyle described Derry City and Strabane District Council as having to spend “additional money on top of losses” in order to maintain essential services.
“There is very little income coming into the council and they have to dip into reserves to deliver services,” Mr Boyle told BBC Radio Foyle.
“I’m worried the piggy bank will be empty at some juncture this year.”
Mr Boyle warned: “Without central and regional government support I am significantly worried that in the medium to long term the council actually wouldn’t have the finances to continue operations as they normally would.”
Derry City and Strabane District Council confirmed the loss of income had come at a time of additional cost pressures.
A council spokesperson said the current COVID-19 emergency situation has had a significant financial impact on council”.
They said the financial impact “was still being calculated,” but officials were working with NILGA and other councils to claim back “emergency expenditure incurred during this emergency period from central government”.
The council said it had “no plans to lay off staff despite the financial difficulties” but would “highlight the need for urgent government intervention to assist councils deal with the impact this financial downturn will have on its ability to provide public services”.
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