Speaking at a Queenstown Business Chamber breakfast event in Frankton, Mr Hipkins said a regional deal with the Queenstown Lakes and Central Otago district councils could provide "bespoke solutions" to some of the region’s unique challenges.
"I think the concept is absolutely the right one, but the government has to invest in them to make them work.
"We would keep them — if anything, we would look to expand them.
In Queenstown, the population had grown much faster than its infrastructure, and the government had to accept its share of responsibility for that, "and its share of the burden for fixing it".
The two district councils, along with the Otago Regional Council, have been selected to negotiate a 10-year regional deal partnership with the government.
One of the proposals up for negotiation is a privately-owned, but publicly operated, base hospital in Queenstown.
Its backers say it would provide services not now available in the region, and could be leased to Te Whatu Ora Health New Zealand.
Asked by an audience member if he would back such a project if he got back into government, Mr Hipkins said he would if the contract had been signed to build it.
However, he was concerned the current government would use regional deals as a way of "telling local government what they need to do, and leaving all of the burden with local government".
The government’s consideration of rates-capping for councils might be politically attractive to some, but would be a "guaranteed recipe for disaster".
"Don't get me wrong, no-one wants to pay higher rates, but if the government wants to do that, they have to be clear on where the money for councils is going to come from."
