A lawyer specialising in local government warns that changes to councils' functions mean the courts will soon be deciding on their big projects.
The Local Government Amendment Bill, which is aimed at controlling council spending, reducing rates increases and council debt, passed its final reading in Parliament on Thursday night.
For the past 10 years, council activities have had to fit into one of four categories - social, cultural, economic, or environmental.
Under the new law, councils have to prove that any project they fund is a core service.
Lawyer Michael Garbitt said High Court action will become common as organisations or residents groups question expenditure.
Local Government New Zealand president Lawrence Yule said a number of councils have already been threatened with legal action.
A Radio New Zealand political reporter said the legislation also makes it easier for a minister to intervene in the affairs of individual councils if there is a perceived problem.