Tauranga council's funding partners for the city leg of the cycleway would have been the New Zealand Transport Agency and the Government's National Urban Cycleway Fund.
The council's decision will be tested against public opinion when consultation begins on the Long Term Plan.
In other decisions today, the council has backed a scheme that could see it pour nearly $1 million to bring the former Mount Cosmopolitan Club building up to leasing standards.
The council has given its commercial arm Bay Venues Ltd the chance to raise an additional $2 million to fit out the building and buy gym equipment in order to convert it into a high performance sports training centre.
The decision mostly went against staff advice to sell the building, its carpark and a neighbouring residential property at 50 Miro Street. Councillors agreed to sell the residential property which has rating valuation of about $600,000 despite Cr Rick Curach arguing that there was strategic value in retaining the property because of its connectivity to the main site.
Today's meeting also decided by a vote of 9-1 to use this year's $1m rates surplus to offset the $1.37m costs of dealing with the Civic Centre's toxic mould problem and shifting staff to temporary premises. The rest of the money will come from the risk management reserve.
It was also agreed to put aside $1m a year for the next two years to fund Project Clean costs and $1m a year for the next two years to address water tightness and seismic issues with the civic block complex. A further $800,000 a year from 2017-18 would be put aside to bring the buildings up to standard.