Whanganui mayor Hamish McDouall says the two-year government review into the future of local government will find major systemic issues but local decisions should continue to be made locally.
Councils could face major changes to their role, structure and financing following the review, which will begin this week.
Local Government Minister Nanaia Mahuta said the review would shape the next generation of local government.
The review will consider what local governments do and how they pay for their duties.
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It will also explore what local government will look like over the next 30 years, including its functions, partnerships, and representation, participation and governance.
The review should focus on what councils do well and not so well, and what government does that councils could do better, McDouall said.
"The current system has some major flaws. Right around New Zealand you've got some infrastructure problems, whether it's Wellington's water pipes or Carterton's wastewater - not Whanganui, Whanganui invested very heavily in wastewater and stormwater over the last 20 years.
"But what's the incentive for an elected member to put money into something that's unseen, underground infrastructure? The incentives are wrong," he said.
Equally you could get elected on a single issue or with very little experience and there were no requirements to build up leadership skills, he said.
"Also local government has been doing more and more on behalf of central government and not getting paid for it, so resources are always stretched."
The rates system was a blunt tool and there should be other forms of income for councils, but despite these flaws the review should adhere to local decisions being made locally, the mayor said.