The knockback leaves council without a single cent in grants for the $4.5 million project that was originally to be funded entirely from state and federal money.

That all changed when council voted to take advantage of historically low interest rates and source half of the project cost through a $2.5 million bank loan.

The proposal was put to councillors in a mayoral minute at their October monthly meeting and carried by the barest of margins, 5-4, in a decision that has split both council and the community.

ALSO MAKING NEWS:

And news that council has also failed in its bid to direct to the go-kart track $750,000 of the $1.25 million allocated to Bathurst under the federal government's Local Roads and Community Infrastructure Program will only add to the controversy.

Council general manager David Sherley confirmed the grant application had been rejected but stressed it did not mean all hopes for grant funding were lost.

"The relevant government department advised council that the proposed project did not fit within the guidelines for the [Local Roads and Community Infrastructure] program," Mr Sherley said.

"Council has previously applied for grant funding [for the track] and, as various funding programs come up into the future, if we believe we fit the eligibility criteria we will apply again."

Mr Sherley said council would now look for other local projects that might be eligible for funding under the Local Roads and Community Infrastructure Program.

When councillors voted in August to direct $750,000 of the available $1.25 million to the go-kart track, they also approved funding for lighting on the Denison Bridge, kerb and guttering in Rockley village, toilets and amenities in the Perthville Town Square, work on the Kath Knowles walkway, a canteen upgrade at Bathurst Sportsground and internal trails in the Boundary Road Reserve.

But about 30 other "shovel-ready" projects included on a list compiled by council staff had to be put on the backburner and they will now come under renewed consideration.

They included upgrade works for the Bridle Track, Kelso Community Hub works, a number of footpath and park upgrades, sealing Hen and Chicken Lane, work on a car park at the mountain bike track, off-street parking in lower Keppel Street and vine shade and seating in the Bathurst central business district.

"Council is now looking at other projects to reallocate that $750,000 and will be resubmitting our application," Mr Sherley said.

Mayor Bobby Bourke said the funding rejection would further delay construction of the go-kart track but council would move ahead with the project.

"We need to make a start on the go-kart track to attract this sort of funding," Cr Bourke said. "If we don't make a start then we've got no chance and that's why council has decided to kick it off [with a loan]."

Cr Bourke said council believed it had a strong case for funding under the community infrastructure program when it submitted the original application.