The LGA, which represents more than 350 local authorities in England and Wales, is calling for police and councils to be able to decide locally how to spend and share the money.
Under the proposals the police will receive 70% of the money while local councils will receive the remaining 30%.
Councils are asking for government to give local areas the flexibility to decide how to introduce charges and decide which types of premises should be made to pay it, dependent on how much time and resource officers have to allocate to them. It is particularly concerned about the national proposals to exempt eight different categories of pubs, restaurants and bed and breakfast accommodation.
Cllr Mehboob Khan, Chair of the LGA’s Safer and Stronger Communities Board, said: “It’s entirely appropriate that bars and clubs should contribute towards the cost of cleaning up the inevitably messy aftermath of a big night out.
“The introduction of a LNL is a definite step in the right direction, but the current plans for how the money can be used risks taxpayers still being left to pick up the bill because it fails to recognise the significant contribution made by local authorities.
“The best way to tackle rowdy alcohol-fuelled trouble is to minimise the chances of it happening in the first place. Councils have led the way at this, whether it be employing taxi marshals to keep things in check as revellers make their way home in the early hours, or redesigning high streets to remove pressure points which get too crowded at closing time at the local nightclub.
“This sort of innovation could be stifled if Government persists with placing too many restrictions on how money should be spent."