Community Bank Chair Mark Rak said it had recently become apparent to the bank that what was being built was different to what it had originally agreed to in June 2017 - a multipurpose auditorium that could host not only the cinema but performing arts, presentations and meetings.

Mr Rak said the bank had not withdrawn support from the cinema, but from the council, as it was not prepared to adjust its design to achieve the facility it agreed to.

Hepburn Shire Council chief executive officer Evan King said that what was being built was no different to what was originally planned and he had recently been in discussions with both the bank and the cinema group as a result.

"We cannot push the walls out due to structural issues so the only other option would be to reduce the seating, but that would reduce the capacity of the whole venue and the cinema group needs as many seats as possible to optimise their financial sustainability," he said.

Mr King said the funding was to be put towards seating in the space so now Daylesford Community Cinema was looking at grants and other funding avenues.

"It shouldn't delay the project provided they can find the funding," he said.

Daylesford Community Cinema president Gina Lyons, said the timing was "strange" given council's decision of March 2017 to construct a cinema was the result of a two-month community campaign to save it and plans had not changed since then.

"Now, just as works are about to recommence for the final time, [the bank has] decided that what is being built doesn't fit with their concept of an auditorium.

"It is very, very disappointing," Ms Lyons said. "We see this as yet another setback in a project full of setbacks - but we will overcome it! We are determined that the community will have a new cinema early next year."

The group hopes it will not have to resort to fundraising again, given that the community has donated so much to keep the cinema afloat in the past.

"With the community bank's decision, we will have to apply for grants to fund the seats and this is underway. Depending on our success will determine if we need to also fundraise," she said.

Mr Rak said the bank had previously committed to funding a $5000 marketing package with the cinema group once it re-commenced operations at The Rex.

"This offer remains current and will be finalised once the Rex project is completed," he said.

The Rex is now expected to open in early 2020.

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