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The Dunedin group planning a multimillion-dollar cable car system on High St has had a setback, missing out on a $100,000 Provincial Growth Fund request to help keep the project moving.
While disappointed, Dunedin Heritage Light Rail Trust spokesman Neville Jemmett said he was continuing with the project.
The trust has built a shed at Mornington Park and obtained three cable cars.
Its plan is to replace the shed with a larger structure, install tracks and reinstate the route that last ran in the 1950s.
The trust put in a bid for $100,000 from the Government fund at the start of the year, to discover if a tentative budget of about $23million was realistic.
The plan was for a feasibility study into the project, which would identify its requirements and present a basic concept that would be costed.
But Mr Jemmett said yesterday the application had been declined by the Ministry of Business, Innovation and Employment.
The ministry said the project did not meet growth fund criteria.
The criteria included increasing sustainable regional development, contributing to increased jobs, training and work readiness in priority areas, and "adding value by building on what is there already, and acting as a catalyst, while not duplicating existing efforts''.
Mr Jemmett said the response was disappointing: "I'm disappointed and surprised.''
The trust was continuing with stage two of its project, an $8million plan to expand the cable car shed into a two-storey complex able to hold at least six cable cars, a cafe, a museum and sports changing rooms.
There had been meetings with the Dunedin City council planning department on that and funds would be sought through charitable trusts and sponsors.
However, the trust still needed to have a feasibility study done and would continue to seek funding.