Smith said time was of the essence if the glacier town was to be saved.
A $24 million proposal by the West Coast Regional Council for better stopbanks and a new bridge appears to be hanging in the balance as the new government reviews it, and no funds have yet been released for the work.
O'Connor said the new minister for regional development, Stuart Nash, wanted to be sure the Franz Josef plan and other big-ticket projects approved under former minister Shane Jones were not going to be a waste of taxpayers' money.
Smith disagreed, saying the regional council's proposal for Franz had been well thrashed out.
"This is not something we cooked up in five minutes, it came out of the Tonkin and Taylor engineering report in 2017 and for the first time ever we had consensus on the way forward from all parties involved - the Coast councils, MBIE, DOC, iwi, ratepayers and the transport agency."
That included a $500,000 contribution from ratepayers and a firm commitment to moving the town away from the Waiho River and the Alpine Fault, he said.
"But someone - and I don't know who - has gone back and put a spoke in the wheels by bringing up the idea of letting the south bank of the river go, flooding all the low-lying land, re-routing the state highway and buying out all the properties on that side."
Smith said that might happen eventually but it would be disastrous for Franz Josef, its tourism future, and for local farmers to suddenly abandon them and let the river have its way.
"The town's on the brink of collapse - the local fire brigade is down to four members from 12 because people have moved away, and it can't function. Things are pretty grim."
"And now we have this uncertainty over the one project that would give them a lifeline by putting bums in beds and keep food services operating...
"We were all part of the agreed solution and the application for funding by the regional council was approved as a spade-ready project and announced in Hokitika by (former) minister (Fletcher) Tabuteau and Damien O'Connor himself."
The regional council urgently needed the funding to be released to allow contracts to be let and get the work started.
Regional council chief executive Vin Smith said the Franz Josef river protection project was being "securitised" by MBIE and NZTA, meaning it was being subjected to a detailed review.
Once reviewed, the project would be considered by cabinet ministers in the government's infrastructure reference group, Smith said.
- By Lois Williams
Local Democracy reporter