The Tumbarumba Chamber of Commerce voted 40 to one to support a motion of no confidence in Snowy Valleys, which was created by the merger of the former Tumut and Tumbarumba shire councils.

More than 200 people attended a weekend rally in Tumbarumba, appealing for Minister for Local Shelley Hancock appealing to the Minister for Local Government Shelley Hancock to act on a proposal for the de-merger of the council.

The Save Tumbarumba Shire group says it has also taken its concerns about the council to the Independent Commission Against Corruption.

Save Tumbarumba Shire's Neil Hamilton said these financial concerns dated back at least a year and related to the size of a council operating loss.

He said Save Tumbarumba Shire was also concerned about a decision by the council's general manager Matthew Hyde to sack three directors.

"It's bizarre. What we know is that they have been sacked under a no-cause clause in their contracts. What we don't know is what led up to it," he said.

"We're hearing lots of rumours. We haven't heard anything we can repeat."

Dr Hamilton said there were also concerns that up to $15 million in government funding would have to be returned because the projects would not be completed on time.

"It took them nine months to build a long-drop public toilet at Tooma, it took them a year to build a brick dunny in Rosewood," he said.

Dr Hamilton also expressed concerns about the handling of the Tumbarumba caravan park, which was behind schedule and over budget.

Ian Chaffey, the last mayor of the the old Tumbarumba Shire Council, said residents remained unhappy about the merger.

"They wants their democracy back. They want their old shire back and you've got to remember that good governance only ever happens by accident in democracy. It's not a given. You can't make it happen," he said.

Snowy Valleys mayor James Hayes described the situation as very difficult.

Councillor Hayes said he had raised Tumbarumba residents' concerns with the minister previously.

"We are trying to do a job under very difficult conditions. They are not making it very easy for us," he said.

Member for Wagga Joe McGirr described the situation since the merger in May 2016 as "toxic".

"I think the merger was not a good idea. I campaigned on de-merging, stopping and reversing council amalgamations," Dr McGirr said.

"I remain extremely concerned that the merger has been a real difficulty for the Snowy Valleys Council.

"I think the council has worked in good faith to make it a success. I think they have encountered a number of real difficulties, both in how it was brought about in terms of the mechanics of it and also the fact there is just ongoing dissatisfaction.

"There is no community of interest. I'm really concerned that it's continuing to make relationships between the towns toxic."

Dr McGirr said he had raised the issue with the Minister for Local Government.

He said that if Ms Hancock did not allow a de-merger to go ahead, Snowy Valleys Council was going to need more support.

A spokesperson for the minister said de-merger proposal received by the Minister was "given due consideration and assessed against all the requirements under the Local Government Act".

"The NSW government is committed to ensuring the best possible outcome for the residents of the Snowy Valleys Council," the spokesperson said.

However, the opposition's spokesman for local government, Greg Warren, has taken a tougher stance.

"The NSW Liberals and Nationals policy of forced council mergers was deeply misguided, ill-conceived and irrational," Mr Warren said.

"NSW Labor on the other hand, does not support forced mergers or de-mergers.

"If a de-merger was something the majority of residents in a community supported, then that is something I would deeply consider."