The Tasman District Council has turned down a $20 million loan from the government's Provincial Growth Fund, which has halted plans to upgrade one of its ports.
The council had sought money from the fund to redevelop Port Tarakohe in Golden Bay, which was presented amid fanfare last month by the Deputy Prime Minister Winston Peters when he rolled into Richmond in his campaign bus.
The top of the South Island's aquaculture industry leaders said government investment was the missing piece of the puzzle Golden Bay's burgeoning mussel industry.
But the council has now said its proposal was dependent on a grant, not a loan, with funding also from ratepayers and industry.
Mayor Tim King said it was now too risky to proceed on those terms.
"We appreciate the Crown's offer, but ultimately a loan has to be repaid.
"It is disappointing we won't be able to invest in this proposal for Port Tarakohe but the upgrade isn't financially viable under the current funding model."
King said he appreciated all the time and effort put into the plan so far.
"The port is an important strategic and community asset for Golden Bay and the council will continue to work with stakeholders on the future operations of the port and options for staged redevelopment."
In August 2019 the council agreed to seek a $22m grant from the Provincial Growth Fund towards the planned upgrade. The upgrade was proposed to cater for increased mussel production, as well as improve recreational facilities and protection for little blue penguin nesting areas.