Local Government New Zealand says the Government and the private sector will have to fill the gaps if councils are forced to focus only on core services.
In Queenstown on Sunday, councils voted to oppose a new definition of the role of local government.
The Local Government Amendment Bill is currently before a select committee.
Councils want to be able to continue environmental, social, cultural and economic activities.
President Lawrence Yule told Morning Report councils had to work in areas that weren't core services to make up for central Government's lack of support.
He said a new definition of what was a core service would be open to numerous legal challenges.
Mr Yule said the new policy could limit councils helping communities when they needed it.