The system for allocating government infrastructure funds to councils is unfair and should be reviewed, the mayor of Clutha District says.

Photo: RNZ

The Ministry of Business Innovation and Employment (MBIE) handles applications for the Tourism Infrastructure Fund, set up by the previous government to support local communities facing pressure from tourism growth.

The fund provides up to $25 million per year for the development of tourism-related infrastructure such as carparks, freedom camping facilities, sewerage and water works and transport projects.

In December, the Clutha District Council's application was declined, as have all their applications to the fund.

Mayor Bryan Cadogan said it was a frustrating process.

"There's a need across the country but there needs to be a fair system and when you look at the criteria [for the funding] one of the three is that preference will be given to councils who have reached their debt system.

"Preference will be given to council's that have reached their debt ceiling, I don't believe that's fair.

"We have always run a very conservative council, so we're in a conundrum because we desperately have the need and because we have cash in the bank: we don't have any CTOs or companies like a port or a power company.

"Ours is in cash and it seems to be that while that's the case we will never succeed in our applications."

He said the criteria for funding needs to be reviewed.

"Morally I can't have farmers put money aside for a water scheme and then we go 'oh guess what we've used it for infrastructure in the Caitlins', how can I do that? I can't.''

Mackenzie District mayor Graham Smith met the new Tourism Minister Kelvin Davis last week, in what was the first visit to the district for the Labour MP.

Mr Smith said the council was never sure if its funding applications would be successful.

"It's playing havoc with our accounts, as a council we have to budget our expenditure, we have to provide long term plans and this type of expenditure is very difficult for us to manage.''

Mr Davis said it was helpful to receive feedback about how the process worked for them.

"I appreciate the fund doesn't necessarily fit with councils' longer term planning cycles. The [fund] was set up under the last government but we will look at ways to better integrate with council timeframes.''

He said there were no plans to review the funding criteria at this stage.

Mr Cadogan said infrastructure funding would transform the district.

"We've got the Catlins, the jewel in the crown. We've also got the quintessential town of Lawrence, and a real neat story from a commercial base about where New Zealand started from colonisation times with goldmining.''

He said while the district has a fledgling tourism industry the population was too low to support the necessary infrastructure.

"The throng of tourists in the last two years, coming in, not having to spend any money because it's just beautiful scenery that they're looking at but there's still the need for the facilities.

"And because we don't have the advanced tourism infrastructure where we can make them stay and make them pay there's no way of extracting money out of the tourists.

"We are definitely meeting the need of the criteria but because of this one anomaly that 'oh as a council you have other money why don't you use it for that?' We miss out every single time and that's not fair.''