The secretary of state for communities and local government Eric Pickles recently launched a consultation, which could see council newspapers forced to publish no more than four times a year.
Hammersmith & Fulham Council produces a fortnightly newspaper, H&F News, which has attracted criticism from Trinity Mirror because of its impact on the publisher's own title Fulham and Hammersmith Chronicle, but under the new guidelines H&F News could be banned.
The council now intends to transform its newspaper into a partnership arrangement with an independent news provider; a tender is expected to be launched next week.
It said the move would guarantee 100% editorial independence whilst "ensuring council tax payers benefit from a share of advertising profits and low communication".
However, it still intends to use the newspaper to "communicate and engage" with residents in an allocated space clearly set aside.
Council Leader Cllr Stephen Greenhalgh said: "This is about creating the best of both worlds of having a newspaper with independently produced news, but with council tax payers benefiting from its commercial success.
"We want the council to be scrutinised and we want local public services to be held to account. However, we also want a return on our investment given that our council newspaper has created an advertising market in our borough virtually from scratch to one that is worth £500,000 a year.
"We expect to be criticised when we get things wrong and we want a newspaper that reflects the views of the community, particularly at a time when all councils face tough spending decisions."
The council has said that it will help transfer all existing private and council advertising into the partnership arrangement and will work with the news provider in other ways to support the commercial operation.
It is yet to be determined whether the plans will be acceptable under any new guidelines, but the council said it would be going ahead with its plans regardless but will be "monitoring the progress of the consultation".
It will also be interesting to see if Trinity Mirror chooses to tender for the newspaper, which could see the two titles merged together.
Simon Edgley, managing director of Trinity Mirror Southern, added: "We would be interested to see how H&F's plans fit in with the new framework proposed by the Government."
