Whangarei has lost millions of dollars earmarked for building the Hundertwasser Art Centre, after the Whangarei District Council failed to reach a decision on it.
The council backed away from the project in June but agreed to evaluate an offer by a local trust to build it.
Lotteries funding and a Northland charity had allocated more than $3 million for the Hundertwasser project and agreed to hold it until this month's council meeting.
At that meeting, the council voted to hold a referendum in February.
The Prosper Northland Trust said the charities that offered money could not wait any longer and the funding had gone elsewhere.
The trust said Whangarei could apply again but had lost credibility.
Prime Minister John Key said there were some strong arguments for building the Hundertwasser art centre in Whangarei.
Mr Key said he was aware of concerns about the cost of the centre but, as Minister of Tourism, he was also aware of potential benefits.
"I mean Hundertwasser's a brilliant man in his day and the proposal was totally unique to Whangarei. It can't be moved anywhere else. So it can only be built there," he said.
"Certainly, there are people that believe that it would add a particular reason for people to overnight in Whangarei and therefore stay longer, so there are some real benefits."
Mr Key said if the Whangarei councillors decided to proceed with the project, he would expect them to come and see him for help.