Dunedin City Council transportation planning manager Don Hill confirmed the tunnels project would be delayed by an NZTA decision to review its "over-subscribed" national transport planning funding.
The agency provided 75% funding for transport planning initiatives in New Zealand, but funding would not be provided to local authorities until the review was completed, Mr Hill said.
In Dunedin, the decision meant delays in receiving - and possibly changes to - $701,250 in NZTA funding for six projects that had been expected to proceed over the next three years, Mr Hill said.
The council was to spend $233,750 to fund the remaining 25% of the projects' cost.
The cycleway project was the major casualty in Dunedin, as it could not proceed without the NZTA funding assistance, Mr Hill said.
His comments were in a report to yesterday's council infrastructure services committee meeting.
Cr Kate Wilson took issue with the delay, saying the committee had instructed council staff to investigate the tunnels project, not the NZTA funding.
Following a suggestion from Cr Wilson, councillors voted to seek alternative funding from the New Zealand Cycleways Project and, if unsuccessful, proceed with a feasibility study paid for from existing budgets.
A decision on cycleways funding was expected by February 1 next year, and Cr Wilson wanted the feasibility study to be completed by the end of the 2009-10 financial year.
Cr Teresa Stevenson said she believed the latest delay was "a little bit embarrassing" for the council, which had "failed at every post" to progress the tunnels project.
"If we say we are going to look at it, we should look at it," she said.
The investigation had also been delayed earlier this year, after council staff who were needed to draw up terms of reference to confirm NZTA funding were kept busy dealing with the city's parking review.
Mr Hill said the investigation of the tunnels concept was the major project affected by delays in confirming NZTA funding.
Other projects affected included a $25,000 crash reduction study planned for Dunedin, forward strategies for street lights ($30,000) and protecting low-lying parts of the coastal road network from sea level rise ($30,000).
Mr Hill said the three projects were not time-critical "and the delay is not of consequence to them".
A planned review of the council's transportation strategy during 2010-12, costing $500,000, was also listed, but delays were expected to be resolved by the time the review was due to start early next year, he said.
A plan to build a $300,000 micro-simulation model for city roads was also listed, and had already been scrapped after discussions with NZTA staff, Mr Hill said.
More information on NZTA's funding was expected in several weeks, allowing a better understanding of the implications for the council, Mr Hill said.
