Local Government New Zealand is warning a proposed rate cap on councils will increase debt costs and place additional burdens on ratepayers.

This comes after S&P Global Ratings released its downgrade of the New Zealand local Government institutional framework score last week - lowering the credit ratings of 18 councils and three council-controlled organisations.

LGNZ President Sam Broughton says capping rates would stop local councils from properly investing in their communities.

"New Zealand's got billions of dollars of infrastructure deficit at the moment because we've kept rates artificially low over generations."

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