Local authority leaders in the Wanganui region have flagged concerns about changes included in the Local Government Act Amendment Bill, which passed through its third and final reading in Parliament on Thursday night.
The Government said the legislation would rein in local authority rates increases while the Opposition claimed criticism of councils was unjustified and would result in reduced services to communities.
Rangitikei mayor Chalky Leary said the new legislation would create concern among councils worried that it gave individuals potential to constantly challenge council decisions to the point of taking legal action.
"Under this legislation, a person can take our council to court if they feel the council is spending ratepayer money unwisely. The argument they had in Dunedin over the new stadium is an example of what cost that can carry.
"But I do have a concern that really vexatious individuals could make life very difficult for councils," Mr Leary said.
People always regarded rates an unnecessary imposition, "but what they're really upset about is they haven't got enough money to pay all their other bills. It's not just about rates."
He said the Rangitikei District Council was a "very lean machine" and there was little else that could be cut back in terms of operating costs.
"The Government's already demanded so much accountability and transparency that this really is just more of the same," he said.
Ross Dunlop, South Taranaki's mayor, said while it was "business as usual" for his council, he acknowledged the council would probably be more diligent in all that it did.
Mr Dunlop said while there would always be projects of community good the council would get involved in, there was now the potential for some judicial challenge.
"While the majority of the community may be supportive, there's always a very small group who would be prepared to challenge everything that we did," he said.
Wanganui's mayor Annette Main said although she was disappointed the Government did not change from its original stance with the legislation, she believed there was still the opportunity for the council to work alongside its community with issues such as the Annual Plan.
"There's always been that opportunity and I'm hopeful that remains," Ms Main said.
And she said was hopeful councils would be able to continue to work in areas specific to their own community. In Wanganui's case, she said two of those areas would be in the arts and digital technology.
Local Government New Zealand's president, Lawrence Yule, said the legislation put more uncertainty into the law by increasing the scope for council decisions to be judicially reviewed.
Mr Yule said a number of councils had already been warned by external parties that they would use the new purpose clause in the legislation to challenge council decisions. He said LGNZ had already expressed concern that the law risked leaving councils open to expensive legal challenges that ratepayers would ultimately pay for.
The legislation was the brainchild of former Local Government Minister Nick Smith, who introduced it saying local authority spending, debt and rates hikes were out of control.
Labour local government spokeswoman Annette King said the bill was based on "shonky figures and untruths".
The legislation aims to:
Encourage councils to exercise greater financial discipline.
Provide a system the average ratepayer could understand to assess the financial prudence of their council.
Make it easier for central government to intervene in local authorities before situations become critical.
Streamline procedures making it easier for community-led reorganisation proposals to proceed.
Requiring standard reporting of information on staff and remuneration in council annual reports.