The £27.8m Very Light Railway centre is set to be built in Dudley, bringing hundreds of jobs and boosting the local economy.
However, the ambitious project has hit difficulties after it emerged a bid for Government funding had been rejected. Dudley Council chiefs also said they must cut costs on the scheme which is "exceeding the budget slightly".
The funding bid has since been re-submitted, with experts hopeful they have done enough this time to convince the Government to release the crucial funding.
The innovation centre, which will be built at Castle Hill, will design and build lightweight rail vehicles. Research and development laboratories will also be built alongside facilities for general manufacturing, conferences, teaching and training and further infrastructure.
Test tracks for the lightweight trains will run for 2km from Castle Hill to Cinder Bank.
A new footbridge will be built over Tipton Road to connect the light rail centre to the new metro line, when it is extended to Dudley. Phase one of the project is set to get under way once a contract for the job has been awarded and is scheduled to be completed by spring 2021.
A report on the project said a bid for European funding of £5.35m had been turned down by the Ministry of Housing, Communities and Local Government (MHCLG) as it had not been shown it was suitable for state aid "the business plan did not give the assurance that there would be sufficient return on investment".
However, Dudley Council said it believes it has ironed out the issues raised by the Government and is confident it will be able to secure the cash.
The report said: "The team has taken legal advice and is confident that the re-submission will now adequately demonstrate compliance with state aid.
"Similarly, the business plan has been amended and expanded upon to overcome MHCLG reservations and now provides a robust plan for the required term of 15 years. The scheme has received approval of the outline submission and the full formal submission was made at the end of May 2019."
Councillor Ian Kettle, cabinet member for regeneration and enterprise at Dudley Council, said: “The initial decision to reject the funding did not have anything to do with the viability or quality of the scheme, and we have addressed the two key issues that were raised by the government in coming to the decision it did.
“We have now submitted a new bid for funding and fully expect it to be approved to get Very Light Rail back on track.
“It is a very exciting project which will create jobs in the borough and position Dudley as a major player in the development of new rail technologies.”