It also said a bylaw could be in breach of the New Zealand Bill of Rights Act, because it would regulate the movement of people, or their access to public places.
"Case law suggests the council could potentially be exposed to a legal challenge as a result," it said.
Since opening in 2015, the lounge had been a hot-spot for trouble-causing youths.
Nearby businesses have had enough of them loitering and intimidating their customers.
The report said a bylaw would not enable police to issue instant fines, so it provided little advantage over the tools they already had.
City council staff were also looking at whether the Trespass Act could be used to address the issue.
But the report said it should only be used in "sufficiently serious circumstances" and could just push the problem elsewhere.
Then, any breach of a trespass notice would result in a prosecution in the district or youth courts.
The board will consider the report, and what to do with the information at next week's meeting.
A working group, made up of city council staff, Halswell-Hornby-Riccarton Community Board members, and representatives from nearby businesses and Westfield Riccarton, has been formed to come up with ways to deal with the loitering issue.
It was looking into other options, including turning off the free Wi-Fi at the bus lounge, and installing security cameras.
