The West Coast Regional Council and Westland District Council have already cancelled their membership.
LGNZ vice-president Campbell Barry, appeared by video link to put the case for staying in the fold, but Greymouth Mayor Tania Gibson was not swayed.
"We have been struggling with this for as long as I have been here, and it is a conversation we have had a couple of times. We have had some turbulent years in the Three Waters space and from this council's perspective, we think that LGNZ has failed abysmally."
Grey joined with C4LD — the Three Waters rebellion group of councils — after LGNZ was heavily criticised for promoting the former government's Three Waters agenda.
Mrs Gibson said C4LD had traction, ideas and solutions.
LGNZ had met councillors many times and councillors did not want to go down that track again.
"The big issues on the Coast, like SNAs, no new mining on Doc land, and stewardship land, and land review — I never heard LGNZ mention them once on our behalf."
Mrs Gibson also raised the nationwide issue of Māori wards, and said while the West Coast had opted for a model of working with local iwi, "nobody has asked us for our input".
"The money we pay to be a member (of LGNZ), the extra expenses of travel and attending conferences — we have to be weighing up what this means for our ratepayer communities and ... I am struggling to see it."
The situation between LGNZ and councils was coming to a point where the current model of local government was "unsustainable."
"I know we are stronger with one voice but we don't believe that one voice is singing from the same songsheet."
Mayors, chairs and iwi forum had gained good traction working with ministers, without the "big fee attached."
The mayor also noted that the conversation about mining royalties coming back to the region had come from mayors, chairs and iwi, not LGNZ.
Councillors all agreed.
Cr Allan Gibson said he considered Three Waters was "a terrible thing — they actually took no notice of us".
Cr Timothy Mora said: "Maybe they are not what we need at the moment. We can't afford them.
"Maybe we can rejoin, but leaving would send more of a wake-up call than individual calls for change."
Cr Peter Davy, addressing Mr Barry, said: "Based on what you have done in the past few years, would I have joined? And I'm sorry but the answer is no. The ball is in your court to prove to us that you are a viable organisation that is worth paying that money to be part of."
Mr Barry countered that a new national council had been elected last year and had "some significant learnings".
"There's a heck of a lot of resources that LGNZ can provide for smaller rural councils that don't have the capacity for that work." Grey risked being "missed out" when LGNZ approached the government.
Mrs Gibson retorted that the new national council was made of many who had supported Labour's Three Waters reforms, "and for us, it doesn't inspire a lot of confidence".
Iwi representative Francois Tumahai said: "We've just got no money, mate — we can’t fix footpaths so we can't justify this. We may have a different conversation next year."
By Meg Fulford
