The Hawke's Bay Regional Council has voted to allow its investment company HBRIC to borrow $2 million to keep the Ruataniwha Dam project alive.
Funding runs out at the end of June and HBRIC said appeals to the consenting process meant a decision whether to proceed may not be possible until February next year.
Five councillors voted to allow the debt and three voted against.
HBRIC said it needed $2 million to fund operations until early next year and start geotechnical and design work on the dam once an appropriate stage in consenting was reached.
The Ruataniwha Dam project has so far failed to meet any of the four conditions required for it to proceed, including having a consent, enough farmers to buy the water and attracting institutional investors.
Hawke's Bay Regional Councillor Rick Barker said he opposed the council's decision to let HBRIC borrow $2 million to develop the Ruataniwha Dam project when it was still not clear if it was workable.
Mr Barker said the council told the public that money would not be spent developing the dam until it was clear it was viable.
"Clearly we are now in a position where we are going to advance some work before we have sign-off on the condition's precedent, that is a concern to me, a big concern."