The Nova Scotia government says it will cover the municipal portion of bills associated with renovating the Queens General Hospital in Liverpool.

The Rural Development Department issued a statement Wednesday saying the government is stepping in because the Region of Queens Municipality needs financial help after the closure of the Bowater paper mill.

The province says it will pay an additional $500,000 toward the project, bringing the province's total contribution to $3 million.

Vicki Conrad, member of the legislature for Queens, says the municipality has experienced a sudden loss of tax revenue, making it harder to fund capital projects.

Mayor Christopher Clarke says the municipality committed $1 million to the project before the mill closed.

The province says it will soon announce details of an agreement with the neighbouring Municipality of District of Lunenburg to help offset its lost tax revenue.