The national umbrella group for local councils wants the government to prioritise community safety over the alcohol industry, with tighter liquor laws.
The government is proposing a change to legislation which would see district licensing committees considering local alcohol policies before renewing off-licences.
However, Local Government New Zealand said it was too hard to get a policy in place at the moment, let alone enforced.
LGNZ president Dave Cull, who was also Dunedin's mayor, said the policies were being shelved because they were too expensive and too easy to appeal.
"Stakeholders with the interest in appealing have deep pockets," he said.
"The liquor industry or the supermarket industry regularly appeal policies that allow, for instance, shorter opening hours.
"For smaller councils, particularly, it's very difficult to be able to afford to oppose that."
That meant legislation designed to reduce alcohol related harm was not having the desired effect.
The process of developing and consulting on such a policy was expensive, in some cases costing councils millions of dollars, Mr Cull said.
They were then "easily appealed" to the Alcohol Regulatory Licensing Authority in Wellington.
Mr Cull said it would be better if local councils and communities had the autonomy to set opening hours for bars or off-licences, for example, without it being appealed.
"If it's been through a process which identifies this is what our community wants, why should that community have to justify that to someone else?" Mr Cull said.
"It's putting the right to trade in alcohol above measures to reduce it `s harm."
Last year Dunedin City Council proposed changes including limiting off-licence hours to between 9am and 9pm.
Suppliers appealed to the Alcohol Regulatory Licensing Authority in Wellington, and ultimately won.
At the time, Mr Cull said the process, which outsourced the ultimate decision to a body that was not based in Dunedin, had undermined local councils' powers.