Alave filed suit later that year, arguing that the city meant for bicycles to be rented and operated in the area and city officials therefore had the duty to exercise reasonable care for intended road users, as required by state law.

The city isn't trying to avoid building reasonable infrastructure, here, they're trying to avoid liability for cyclists hitting potholes.

Their argument seems to be that unless a road is included on the official bike plan, it shouldn't count as one intended for biking on for the purpose of legal liability, regardless of if there's a nearby city-operated bike rental.

Honestly, unless the ruling were that "the city is liable for bike injuries anywhere in it", holding the city liable here might produce perverse incentives to make bike infrastructure worse.