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The cost of Auckland hosting the 2018 Commonwealth Games could carry a price tag of hundreds of millions of dollars.
Auckland City Mayor John Banks said the Government had told him the cost could be that high, though he was yet to see the report himself.
He said the high cost was the reason for the Government pulling out of contributing to a preliminary study.
Minister for Economic Development Gerry Brownlee has withdrawn $500,000 earmarked by the previous Government for a study into whether Auckland could stage the event in nine years.
In a letter to the New Zealand Olympic Committee, the Ministry of Economic Development's industry and regional development deputy secretary, Mark Steel, said the money promised by Labour had been conditional on city councils agreeing to put in money.
"After due consideration, and now that it is clear most cities that were initially approached will not be participating, the minister has indicated he is not convinced that the case has been established for allocating government resources," said Mr Steel in the letter.
Barry Maister, secretary general of the Olympic Committee, said Mr Brownlee had told him after the letter was written there might still be money available. Mr Brownlee had indicated to him the Government might put in a smaller sum to allow the study to start.
That offer could not be confirmed last night. Attempts to contact Mr Brownlee were unsuccessful.
Mr Banks said it was "the end of the matter at this stage".
"I clearly understand the Government's imperatives. They're financially strapped and in a very deep hole and all expenditure is being subject to a line by line, dollar by dollar scrutiny and this doesn't form part of their priority," Mr Banks said today.
He said the event was not just an Auckland event but part of "New Zealand inc" and similar to the Rugby World Cup.
Mr Banks said $150,000 offered by the councils of Auckland was always available.
Alex Swney, chief executive of the central Auckland business group Heart of the City, said if the study was canned, Auckland would miss a tourism opportunity.
"We've got the Rugby World Cup in 2011, to have the Commonwealth Games to look forward to in [another] seven years would have been absolutely spectacular. You don't get a Commonwealth Games without doing the first steps, and this was the first steps."
Auckland last held the Games in 1990, but not all civic leaders back a 2018 bid.
North Shore Mayor Andrew Williams said the cost of hosting the Games had since risen to the point where New Zealand was no longer in the running. He said bad funding decisions meant the country lacked facilities for major events.
"We're no longer in the ballpark for those sort of major events unfortunately."
Manukau Mayor Len Brown said he liked the idea of hosting the Games but all councils in the region would need to contribute. He and Mr Williams said their councils had not yet agreed to help with funding.
The Herald understands a $500,000 Government contribution would have paid for most of the study. City councils in the region were asked to come up with a much smaller contribution between them.
Mr Swney said it did not bode well for Auckland that councils could not agree to pitch in "with what at the end of the day is a bit of chump change" to make a decent effort.
