District councils account for just five percent of local public expenditure despite being seen and scrutinised by the public as the main provider of services compared with unaccountable quangos.
The study by sociologist Dr Stuart Wilks-Heeg argues that an urgent revival of local democracy is needed that is aided but not driven by central government.
The report - 'Whose Town Is It Anyway? The State of Local Democracy in Two Northern Towns' - sets out 11 policy recommendations based on a study in Burnley, Lancashire, and Harrogate, North Yorkshire.
Dr Wilks-Heeg said: "The past decade has seen a proliferation of mechanisms intended to promote contact between citizens and local public agencies.
"But the fact remains that more and more services are now delivered by unelected agencies. So we have a real democratic paradox. District councils have far greater levels of contact with residents than any other local public agency. And yet they have been left increasingly emaciated by the transfer of functions to other bodies.
"If we seriously want to promote greater public engagement in local affairs then this, and other, local democratic deficits must be addressed."
The study, commissioned and funded by the Joseph Rowntree Charitable Trust, concludes the biggest threat to local democracy is continuous reform from central government. This includes 'merger mania' - creating larger geographical units of delivery for local services - and the drive towards fulfilling centrally defined performance criteria and targets.
The report indicates that the 'scaling up' of services makes them more remote from local residents and reduces the extent to which citizens can influence decisions affecting their towns. Residents are also often confused about which agencies are responsible for which services even though district councils have far greater levels of contact with local citizens than any other local public agency.
But while the shortcomings in local democracy are enormous, there are elements of the local democratic 'infrastructure' that remain strong.
The research suggests that 'superactivists', parish councils, faith groups, public buildings acting as 'little icons', the local press and local elections all provide part of the basis upon which local democratic renewal can be built.
Dr Wilks-Heeg added: "These all play a crucial role in sustaining the local democratic process and they provide many of the building blocks for its revival."