That was the "worst case scenario" presented to the ruling-Labour cabinet by officers this week, in anticipation of when police and crime commissioners replace police authorities in England and Wales later this year.
Candidates are still to be unveiled but the council is worried that Reading's needs - as one of only a few large urban areas in the Thames Valley - will be overlooked.
Concerns stem from the Government's decision to switch funding control from community safety partnerships and alcohol action teams to the elected commissioner covering the Thames Valley.
Reading's safety partnership is one of 16 in the region and has been grappling with a £72,000 decrease over the past year.
Council leader Jo Lovelock said the administration must start lobbying candidates as soon as they are known, while deputy leader Tony Page stressed the threat to Reading "is very real".
The report said the "major" risk area is in drug services for adult criminals. From next year Reading's drug and alcohol action team will lose its drug intervention programme (DIP) grant from the Home Office, which totalled around £900,000 last year. The money will go to the commissioner, despite Reading having one of only three "intensive" DIPs in the region.
Officers predict the loss of funding will lead to offenders not being identified and given appropriate treatment, resulting in a rise in crime.
The report also explained that more than £50,000 Home Office funding for youth offending and drugs services will go to the commissioner from next year.
Council officers argue that young drug users will miss out on treatment, while the youth offending service will be unable to carry out its statutory duties, resulting in an increase in the number of youngsters committing offences.