A local government leaders' review of the way councils are funded is important for Tauranga's development, the mayor says.

A new report has proposed various new taxes at local level to underwrite councils which are struggling to stretch their budgets.

Local Government New Zealand (LGNZ) released the funding review discussion paper this month with options for addressing current and likely future funding shortfalls at local territorial authorities.

The report was the first in a two-stage funding review and considered alternative ways to deal with the increasing demand on services and infrastructure.

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Suggested options included adding a local income tax, local expenditure tax, selective taxes, regional fuel taxes or transaction taxes.

LGNZ said councils spent about 10.5 per cent of all public expenditure, but raised only 8.3 per cent of all public revenue.

Tauranga mayor Stuart Crosby said the review was important, particularly for the growth of the city.

"We have limited tools for funding: Rates, user fees and charges, and development contributions," he said.

"Any opportunity to broaden that is welcomed."

LGNZ president Lawrence Yule said the findings demanded New Zealanders "take a fresh look at the way local government is funded for the benefits of communities".

"The goal is not to increase the overall tax burden for New Zealand, but rather to determine whether a different mix of funding options for local government might deliver better outcomes for the country," he said.NZME.