Maniototo Health Services Ltd had been told by Health Minister Jonathan Coleman its request for one-off government funding towards the project had been denied, and no Southern District Health Board funding was expected either, MHSL manager Geoff Foster said.
MHSL had been hoping for a discretionary grant of about $1 million and it was disappointing no government assistance was available, Mr Foster said. The Government said new health facilities should be paid for by accumulated funds, but the Maniototo hospital was only transferred to a community trust in the 1990s and it had not been possible to save the full rebuild amount in that time.
The old 1929 hospital building had also required costly restoration which further affected savings.
However, ''upbeat'' hospital leaders were still confident the proposal would proceed, Mr Foster said.
MHSL has $2.4 million so far towards the rebuild, which will involve building a new hospital wing and upgrading the rest-home wing. Of the money raised, $2 million is from MHSL reserves, $350,000 from community fundraising and the sale of naming rights for hospital room, and $50,000 from a Perpetual Guardian grant.
MHSL had already been seeking up to $2 million from the Central Otago District Council - to be paid back by Maniototo ratepayers - and ratepayers were asked in the draft 2017-18 CODC annual plan.
Ratepayers were asked if they were willing to provide nothing, $1 million, $1.5 million or $2 million towards the project.
The money would be funded by a loan over 25 or 40 years, or by a combination of a loan and proceeds from selling two Maniototo properties owned by the Maniototo Community Board.
A public meeting about the issue was also held and the strong feeling at the meeting was ''provide as much money as possible now and repay it later'', Mr Foster said.
Those at the meeting had also preferred selling the Maniototo properties to fund the council contribution, MHSL chairman Stuart Paterson said. He said the properties could fetch more than the $2 million required.
Now it was confirmed no government money was coming, the CODC money was needed more than ever and it was hoped the full $2 million would be provided, Mr Paterson said.
MHSL is also applying for grants from other trusts for the rebuild, which will create ''flexi-rooms'' at the hospital and rest-home facility.
At present there are 16 rest-home beds and 15 hospital beds but the new facility will have 29 multi-purpose rooms.
The hospital had been busier than usual lately - its occupancy had gone up from about 80% last year to 90% this year, Mr Foster said.
This was partly because of the region's ageing population, but also because of out-of-town respite patients.
The new building had been designed so extra rooms could be added later if more funding was secured, Mr Foster said.
But in the meantime, the $5.4 million budget was ''as much as we thought we could raise'', Mr Paterson said.
If more than the $5.4 million was raised, it would probably be used to slightly increase the size of some of the rooms, rather than build more rooms, he said.
It was hoped all the money would be raised by the end of the year and construction start early next year, Mr Paterson said.
