Vancouver Pride Parade organizers say they are disheartened by the federal government's decision to stop funding Toronto's annual gay pride festival.

The fest received about $400,000 in funding from Ottawa in 2009, and organizers say they were hoping for about $600,000 this year. Instead, they are getting none.

Toronto City Councillor Kyle Rae called the move "homophobic," and said it "underlies the right-wing religious bigotry which is at the heart and soul of our prime minister."

Federal Industry Minister Tony Clement defended the decision, saying it was based on an effort to fund newer events in smaller cities.

"I think that's better in terms of our tourism strategy for the entire country," Clement told CTV News in a telephone interview.

Homophobic or not, Vancouver Pride Society president Ken Coolen says the decision is economically short-sighted.

"This is not just something we do for our community, it's something we do for our city," he said.

Coolen says Vancouver's Pride Parade, which has grown substantially over the years, brings about $100-million to local businesses annually.

Vancouver's celebration has never received federal funding, but Coolen says the Pride Society had hoped to apply for the same grant Toronto used to receive.

Now, he's not so sure.

"To put all that work into [applying] with the foresight that you're probably not going to get it anyway is a real challenge."

Toronto's 2009 Pride scandal

Tracey Sandilands, Toronto Pride's executive director, said a scandal last year may have something to do with the cuts this year.

Federal Tourism Minister Diane Ablonczy, who allotted $400,000 to the festival last year under the Marquee Tourism program, posed for a photo with drag queens at the 2009 event.

Not long after the picture went public, Ablonczy was stripped of the file and Clement took it over.

"I'm certain that the drama of last year must have had some bearing on the fact that we didn't get the funding," Sandilands said.

With a report from CTV British Columbia's Sarah Galashan