Central Otago Mayor Tony Lepper recently expressed fears the bill was "amalgamation by stealth".
It would allow the Local Government Commission to create council-controlled organisations to manage services such as water, wastewater and roads. The commission would be able to amalgamate these organisations, directing them to share responsibility across council boundaries.
In response to Mr Lepper’s comments, Mr Lotu-Iiga said public consultation would be required when creating these council-controlled organisations.
"I am a firm supporter of local democracy. As a former city councillor, I recognise the importance of local matters being managed locally where appropriate.
"However, there are some matters that are better managed regionally or nationally. It is important to identify appropriate mechanisms for each service delivery."
Amalgamations could only occur after public consultation, he said.
"However, councils will be able to lead amalgamation proposals if they choose. It is expected that councils would only do so if they had consulted their communities.
"It is still possible to hold a referendum or other forms of public consultation on any proposed amalgamation."
The Bill enabled more innovation and collaboration across local government to deliver better value for ratepayers, he said.
"The reforms to the Local Government Act will protect local democracy.
"We want to make these reforms work for the benefit of ratepayers and we are open to making change to the Bill where it is appropriate."
