Queenstown Lakes District councillors canned the scheme in a public-excluded session of their final meeting on Thursday.
A press statement announcing the move, released at 4pm yesterday, said the trial had been "set aside" in favour of a subsidised public transport service for the Wakatipu Basin.
Mayor Vanessa van Uden said councillors "reluctantly" made the decision because of insurmountable compliance issues.
"Something that looked relatively straightforward at the start turned out to be very complex.
"This is a huge disappointment but it is a temporary setback."
The trial was publicly raised as an option by council chief executive Mike Theelen in July, and a month later the council announced its intention to have it up and running by Christmas.
It has been name-checked frequently by mayoral and council candidates in the local body elections as a solution to the resort’s traffic congestion and parking woes.
But potential roadblocks were revealed by the Otago Daily Times last month after Otago Regional Council (ORC) staff pointed out the existing unsubsidised operator, Ritchies, ran its services on a similar route to the one proposed by the QLDC.
Despite neither the ORC nor the New Zealand Transport Agency (NZTA) having funding available for the trial, council infrastructure manager Peter Hansby told the ODT last month he remained optimistic the trial would still go ahead.
Ms van Uden said a recent council survey had shown strong public support for a subsidised public transport service.
The council had resolved to work with the ORC and NZTA towards that aim.
"All of the agencies concerned in funding and authorising a subsidised passenger transport service must understand the importance of this initiative.
"It needs to have the utmost priority for everyone."
