The move, suggested during a presentation by staff yesterday morning, would have increased the organisation's budget to $1.5 million, but it was defeated.
Councillors supported keeping Tourism Dunedin's budget unchanged, at $1.119 million for 2009-10.
Staff were instead encouraged to make applications to the council's industry project fund to finance specific new initiatives.
Earlier, Cr Paul Hudson tried to win support for a more modest $50,000 increase in the organisation's marketing budget, to target domestic tourism, but that was opposed by Cr John Bezett, who favoured a more sizeable contribution.
He supported an additional $215,000 in funding for Tourism Dunedin, on top of the $50,000 aimed at domestic tourism, bringing the proposed total to $265,000.
Tourism Dunedin was competing against other tourism organisations, such as that in Wellington, which had a budget of $6 million, he pointed out.
"They [Tourism Dunedin] are a very, very credible group . . . and they deserve our support."
Cr Richard Walls wanted the increased expenditure included, at least initially, so it could be weighed against other spending plans when a list of final priorities were drawn up later today.
Cr Andrew Noone supported an additional $50,000, provided it was targeted at domestic tourism, to ensure Dunedin "gets its share" of the market.
Cr Neil Collins disagreed, saying the council needed to be seen to tighten its belt.
"I just think we have to show that these decisions we make reflect the times we live in. People in this city are hurting and they are hurting very much.
"We have got to take a responsible attitude to budgeting, which starts here."
Cr Michael Guest agreed, saying councillors were already showing a lack of spending "discipline".
Cr Hudson's suggestion, of $50,000, was put to the vote but defeated narrowly, following a show of hands, 7-8.
Cr Bezett's suggestion was then also put to the vote, and quickly defeated.
However, in a public-excluded section of the hearing, councillors did approve a $40,000 annual increase in trustees' fees and expenses.
