"I was on the understanding that if Justin Lester got in he was going to have it free for those businesses that wanted the outside areas, and wanted to make it a more inviting city.
"I found out about this from you. So I'm disappointed with that.
"Everyone's trying to be smoke free, we understand that, but it shouldn't be a requirement."
Mills said cafes would probably comply, but it was difficult for bars to take away outdoor smoking areas as it was more important to people when they were drinking.
The permit fee could be in the tens of thousands, depending on the size of the outdoor space.
"The ones who are successful might say, 'well we're not going to participate in this, we'll just keep paying', which is a little bit disappointing, because the hospitality industry was under the understanding that fees would be dropped to nothing, without this condition attached."
Mills said the sector was already under enough pressure because of damage from the Kaikoura earthquake.
But Mayor Justin Lester said the version they'd announced still kept their promise.
"We are waiving it for everybody, we're waiving it 50 per cent.
"We've given an incentive on top for those who make it smoke-free.
"They're all getting a reduction in costs, so they can only benefit, there's no detriment.
"We're committed to a smoke-free Wellington by 2025, and this will be one measure we can take that will hopefully have a positive difference."
The council's social development portfolio leader Brian Dawson said the city wanted the air clear.
"We are committed to a smoke-free Wellington, and we're making good progress.
"Wellington has some of the lowest rates of smoking in the country, but there's more we can do, and this is an incentive for more of our venues to become smoke free."
If approved, the changes would come into effect from July 1.
Venues would still need to apply for a permit, even if the fee was waived.
