It was not viable to form a Wairarapa unitary authority - taking on regional council functions - as it would face a funding shortfall of $11.5 million per year.
"We thought the financial implications of that were pretty serious," he said. "Although we recognise there's a lot of support for that up there ... we think the rates burden would be too acute."
Mr Palmer said the public would not notice much change as a local area council would undertake many of the district council's functions. The main difference would be the two decision-making levels, and he was confident Wairarapa would be represented fairly.
Carterton mayor Ron Mark said the report would be considered by the Wairarapa Governance Review Working Party.
He said the proposal would not fit with the current legislation, or the changes indicated in government reforms.
"For this proposal to be enacted it requires a change in the law and I don't see the Government regional council doing that," he said. "I just fundamentally don't think people of Wairarapa will think a), that it's accurate and b), that it's fair."
South Wairarapa mayor Adrienne Staples and Masterton mayor Garry Daniell said the mayors would comment after a combined meeting on Friday.
Regional council representative Mr Gary McPhee said any report which gave people another way of looking at the issue was a good thing. "Nothing is off the table and in the end we want what's best for every community in the region."
Greater Wellington Regional Council chair Fran Wilde said the proposed structure in the report would give Wairarapa fair representation.
Under the proposal, the Greater Wellington Council would consist of one Lord Mayor, four representatives for central Wellington, two for Lower Hutt and one each for the remaining local area councils, including Wairarapa.
Amalgamation of Wairarapa's three councils would be the only boundary change, with the other local area councils following existing territorial authority boundaries.
Local area councils would be similar to district councils in functions such as building consents and controlling local policies such as gambling.
Wairarapa's council would have 12 elected members, with a mayoral figurehead chosen by the council, not elected by the public.
The proposed structure would see the Greater Wellington region's elected members reduced from 107 to 79, and chief executives reduced from nine to one.
The Lord Mayor would be elected at large by the entire region and would have powers including proposing a budget and appointing committee chairs.
A regional hui will be held in November to discuss the report.
