Team New Zealand will not receive government funding if a 2017 America's Cup qualifying regatta is not held in Auckland, the Government says.
Team New Zealand now says it has been told that organisers have decided to pull the competition from Auckland but it is disputing that decision, saying it has a legal agreement to host it.
The competition's organisers yesterday proposed reducing boat size as a cost-cutting measure for the full 2017 regatta in Bermuda.
That left two options on the table for the qualifying regatta, either larger boats in Auckland or smaller boats elsewhere.
In a statement, Team New Zealand managing director Grant Dalton said its bid to host the qualifying regatta with the larger boats had been officially accepted by America's Cup organisers.
"The proposal was to go down to AC45s, a smaller, much smaller boat, same as this, and lose Auckland as a qualifier. That was the chip that was played to convince other teams," he said.
"Or, stay with the [AC]62 and come to Auckland as the qualifier, as agreed, as signed-up at this point, subject to us agreeing the final host agreement, which we now have."
Funding depends on bid success - Govt
Economic Development Minister Steven Joyce said the Government had been very clear that any involvement on its part in terms of sponsorship was reliant on Auckland hosting the qualifying series.
"We just do not believe we'll get that sort of leverage, to make it worth New Zealand's while from an economic perspective, if it's solely in Bermuda," he said.
"That hasn't changed and that's something for the parties to work out amongst themselves but our position on it is very clear."
Mr Joyce said any government contribution would be significantly less than the $36 million given last time.
All the challengers will vote next week on the location of the qualifying regatta and the size of the boats to be used.