Hamilton mayor Andrew King is accused of threatening to pull council funding for three organisations if they backed SkyCity's plans to increase the number of pokies in its Hamilton casino.
King denies making the ultimatum.
But he confirmed telling Hamilton Waikato Tourism, Chiefs Rugby Club and Northern Districts Cricket Association that going against Hamilton City Council's position "may be an issue for future funding decisions".
SkyCity has notified the Gambling Commission about the mayor's alleged threats and the Department of Internal Affairs says the council's chief executive Richard Briggs is aware of the issue.
But Briggs told the Herald on Monday he didn't know anything about King's approaches before his conversation with the DIA yesterday.
Hamilton City Council is opposing SkyCity's application to the Gambling Commission to swap three blackjack tables with 60 extra pokie machines.
Public submissions closed in May and the Gambling Commission's website shows Hamilton Waikato Tourism and the Chiefs Rugby Club have now withdrawn their submissions in support of SkyCity.
All three organisations receive significant amounts of funding or support from the council.
A SkyCity spokesperson said it had notified the Gambling Commission about the mayor's actions.
"We are aware of at least three instances of organisations allegedly being threatened by the mayor but we do not want to disclose any identities. This is a matter for the commission to deal with."
King said he was comfortable with his actions and was just enforcing the council's anti-gambling position.
He said he contacted the organisations about their "patsy submissions" supporting SkyCity and told them they were being naive by not remaining neutral.
"I called them to challenge the appropriateness of them lodging submissions with the DIA supporting SkyCity when they were clearly conflicted because they were receiving funding from SkyCity.
"A key contributing factor when focusing on the funding arrangements and the expectations is that partners act in a way that align with Hamilton City Council's values. I made it clear that I believed they were being naive in being partners that would enter into a public debate whereby supporting SkyCity against Hamilton City Council and not understanding that it maybe an issue for future funding decisions.
"I didn't tell them to pull their [submissions]. I told them they were being naive in what they were doing and I made that very clear."
Asked whether it was appropriate for the senior adviser in his mayoral office to also have put in a personal submission, King said it was nothing to do with him.
"I'm not going to tell any individual whether they are allowed to submit or whether they are not allowed to submit. But what I am saying to the [groups] who Hamilton City Council fund by large amounts of money is that they need to remain neutral."
Hamilton Waikato Tourism chairwoman Annabel Cotton confirmed the board withdrew its submission supporting SkyCity's application to expand its pokie offering due to the "significance of council funding" to the organisation.
"I'm not going to comment on whether I've had approaches from Andrew King or other council-related councillors or mayors. We just decided given the significance of council funding to us it was just more appropriate to withdraw our support."
Chiefs Rugby Club and Northern Districts Cricket Association did not respond to specific questions about the mayor's approach.
But Chiefs chief executive Michael Collins said the Chiefs made the decision to withdraw its submission on its own accord.
"We hold a positive strategic partnership with Hamilton City Council and understand the position they hold. SkyCity are also a valued partner of our organisation and are a big contributor to our local community."
Northern Districts Cricket Association chief executive Ben McCormack said its submission reflected its independent view of the valued partnership we have with both SkyCity Hamilton and Hamilton City Council.
Hamilton councillor Angela O'Leary said one of the organisations had confirmed what she described as the "mayor's veiled threat" to her, but claimed they were too scared to be named or speak out.
"They told me that when they said how concerned they would be if council funding was withdrawn, King didn't deny what he was implying.
"I assured them the mayor has no authority on his own to commit council to any course of action, including the threat of withdrawing funding, but this gave them no comfort at all.
O'Leary said she believed the mayor had breached the council's code of conduct by making a statement that could mislead or deceive.
"This kind of dodgy dealings absolutely undermines the confidence the public has in council and its leadership."
Hamilton councillor Dave Macpherson wholeheartedly supported King in taking the organisations to task for going against the city council.
"As one vote on council, I'll be stuffed if I support giving more money and resources to organisations that support the biggest net exporter of profits from this region and country, and one of the biggest contributors in this city to gambling addiction and the resulting family and community problems."
Local Government Minister Nanaia Mahuta's office was unaware of the allegations, but had since been told Department of Internal Affairs officials had contacted Hamilton City Council's chief executive on Monday and that he was aware of the issues.
Gambling Commission executive director Blair Cairncross would not confirm whether a complaint had been made. He said a hearing date for the verbal submissions on SkyCity Hamilton's application had not been made, but was unlikely to be before November due to the availability of commissioners.
In April, Hamilton City Council voted to spend $150,000 on lawyers to fight SkyCity over its application which would increase the number of pokies in the casino to 399.
A raft of organisations and individuals including Voice Waikato, Waikato DHB and councillor Dave Macpherson have made submissions to the Gambling Commission opposing SkyCity's application.
The allegations come after MPI Minister Damien O'Connor was censured by Prime Minister Jacinda Ardern earlier this year for threatening to withhold funding from a voluntary animal evacuation organisation Animal Evac NZ if it didn't stop criticising MPI.