Mr Ali said yesterday he had attended five meetings since being appointed, but felt uneasy about getting $500 for each meeting he chaired. Other members received $200 for each meeting they attended.
"For what's happening, if you look at some of the decisions coming around the council now, I think it's morally irresponsible for me to collect $500 to chair a meeting and to make very subjective views," Mr Ali said.
"There are about half a dozen panels that has been created, costing ratepayers about half a million dollars, that money could be put to better use."
Mayor Len Brown said the resignation came as a surprise but panel members had raised concerns.
"I am aware that concerns have been raised and I will be calling a meeting of all the chairs of all the panels next week," he said.
All councillors who have a liaison role with the advisory boards had been invited for the meeting, a spokesman for Mr Brown said.
But Denise Krum, lead councillor with the panel, said she has had no communication with the mayor or his office since Mr Ali's resignation.
"I have a great deal of sympathy for Feroz's view ... I'm aware that there's some real disillusionment, several of them," she said.
Ms Krum said she too was thinking of resigning as the panel's lead and liaison councillor, and the Herald understands that at least three of the 10 remaining panels were also planning to leave.
"These are exceptional people, which then makes it exceptionally regrettable that they're potentially wasting their time and wasting ratepayers' money," she said.
A panel member, who spoke to the Herald on the condition of anonymity, said the panel existed just so the council could say it has done the "politically correct" thing.
"We have been asked for advice on matters like community consultation on the drug policy, events and the long-term plan, but we know our advice is not what they are after," said the member.
"The panel is here just so that they can put a rubber stamp to say 'yes, we have consulted the ethnic community' on these issues."
