That is the view of the Central Otago District Council, which has agreed to reverse a district plan change that paved the way for the venture six years ago.
The council's hearing panel considered an application for a plan change last month.
It heard two opposing viewpoints - the plan change applicant said the ''dream was over'' and it was time to move on, while the group behind the potential development said it was not ''dead in the water'' and a scaled-back version was still possible.
The application was made by the Canterbury Mortgage Trust, which is in the process of being wound up.
Trust consultant Graeme Reid yesterday praised the decision as ''common sense''. ''When it was conceived, the idea of building a golf course and hotel complete with spa, was almost off the planet.
It was wildly optimistic in the extreme, I think, given the location, and it became even more economically impossible particularly as a result of the global financial crisis,'' Mr Reid said.
The decision would open up the area, which could be sold as lifestyle blocks for people to build on, he said. A private plan change, sought by Melview (McArthur Ridge Ltd) was approved in 2008, rezoning 645ha of land, 6km north of Alexandra, to become the McArthur Ridge Resource Area (MRRA).
The project, billed as one of Central Otago's biggest developments, was to include the five-star hotel, golf course, 200ha pinot noir vineyard and up to 1376 residential units. The project stalled and the council's decision, made public on Saturday, is to return the area back to its original rural resource zoning.
The Canterbury Mortgage Trust is mortgagee for two companies, Central Otago Pinot Noir Estates Ltd and Thyme Field Ltd, which own about 77% of the land within the area.
At the hearing last month, Peter Dymock, on behalf of the trust, said the current zoning was specific to a particular development that would never be realised.
The project was ''dead in the water'', he said. It had been set up in the district plan as an ''all or nothing'' development. The trust did not want to proceed with it and the zoning prevented alternative uses of the site.
The dream was over and it was time to move on, Mr Dymock told the panel last month. Melview (McArthur Ridge) is now called the McArthur Ridge Investment Group Ltd (MRIGL) and it owns the remaining 23% of the area. MRIGL is insolvent.
Consultant for the company, Warwick Goldsmith, told the hearings panel a ''slimmed down'' version of the project was possible, with a nine-hole golf course, hotel and golf clubroom.
The company's properties had been signed up conditionally by a person ''really interested'' in continuing the vineyard lifestyle blocks and golf course, so the development remained alive, he told the panel, suggesting the council should keep the door open for the original development or some form of it.
People who had built homes on or near the site were alarmed it could possibly be used for intensive farming, he said. Approached yesterday, Mr Goldsmith said he was not in a position to comment until he had seen the council's decision and consulted with his client.
In its decision, the council said the current provisions of the MRRA were a barrier to the area being developed for conventional rural and rural residential purposes.
The rezoning would make the land the same zone as other property in the area. Submitters have 30 working days to appeal the decision to the Environment Court.
