A select committee considering controversial changes to the Local Government Act has been given a five month extension by Local Government Minister Sam Lotu-Iiga.
Mr Lotu-Iiga had hoped to change the Local Government Act so that council-controlled organisations could be created without the agreement of councils or the community.
Nearly every council and mayor in the country is opposed to the reform, and it has been looking less and less likely to get through Parliament.
Mr Lotu-Iiga said he acknowledged some of the concerns and had given the select committee considering the amendment bill a five-month extension for reporting back to the House.
It had been due to report by 28 October; the new deadline is 31 March.
"I acknowledge some of the concerns raised by local government. Solutions need to be found that promote local democracy, while ensuring better quality services and better value for ratepayers," he said.
"I look forward to further discussions with the local government sector to explore options and solutions for the issues that have been raised.
He said local government and central government needed to work together to develop practical solutions that would ensure better services for ratepayers for our longer term future.
The local government sector faces increasing infrastructure costs, and council-controlled organisations were seen as one way of helping manage that, by spreading the investment burden across multiple councils.
Council-controlled organisations generally handle the day-to-day management of basic services, including water and transport.
"The reforms will enable councils to more easily share resources and expertise to address current and emerging challenges," Mr Lotu-Iiga said.
"I will be working with my colleagues and the sector over coming months to address concerns while still achieving the objectives of the reforms."
Labour Party local government spokesperson Meka Whaitiri said the extension was an admission that the Bill was fundamentally flawed.
"This is an absolute admission by the Minister that this almost universally panned Bill is fundamentally flawed and needs a massive overhaul," said Ms Whaitiri.
"Local Government New Zealand and nearly every mayor and council in the country is opposed to this Bill, because of its provisions which undermine local democracy and decision-making."
Ms Whaitiri said there was also a lack of consultation with the sector prior to the Bill's introduction.