The Treasury Minister says his department refused loan requests from Douglas Corporation for the Cambrian Place development because certain criteria were not met.
The local authority was seeking a total of around £14.5 million for its plans to build a car park, public library and offices on the site next to Lord Street.
A joint statement from the Department of Infrastructure and Treasury says there were a number of issues with the proposals.
They included a lack of consultation, no tendering process for the contract and building costs which were deemed too high.
Treasury Minister Eddie Teare:
Clip 1
Golf course fire was organised burn that became 'uncontrolled'
Jail for man who stole nearly £70k from Western Civic Amenity Site
"Halfway Horse Tram" not the only problem on the prom, says council leader
Emergency services tackle fire at Peel Golf Course
