Council bosses in Wakefield need to find £750,000 if plans to preserve Pontefract's medieval heritage are to press head.
Senior councillors will meet this week to discus how they can pull together the cash needed to ensure the Pontefract marketplace Townscape Heritage Initiative can proceed after 650,000 of expected funding was withdrawn due to budget cuts.
The long-awaited project would see repairs and restoration work carried out on historic buildings around the town.
The council applied for 750,000 from the Heritage Lottery Fund to help pay for the work.
A report to the cabinet, which will meet today, says the HLF has said it is minded to approve the application – if the council can match the funding.
When the bid was put in, the authority had thought it would put in 100,000, with another 650,000 coming from Yorkshire Forward.
But the report says: "Since the HLF bid was submitted, the council has been informed that Yorkshire Forward funding will not be forthcoming due to cuts in funding to Regional Development Agencies."
It adds: "It is possible that the only option available to lever the HLF funding is for the council to provide match funding to the value of 750,000 from existing resources."
Local authorities are having to tighten their belts, with Wakefield having to save 19m next year as part of a four-year 67m savings programme by 2015.
Project bosses have been looking at other ways of securing the money they need for the scheme, but they have so far been unsuccessful in coming up with a concrete source of alternative funding.
The report says: "There is a clear risk that without the match funding, the council will lose this opportunity to lever funding that would bring regeneration opportunities for Pontefract."