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New Zealand Transport Agency's highway and network operations had applied to the Otago Regional Transport Committee to include in the Regional Land Transport Programme for 2012-15 a proposal to develop the cycle lane options.
To do so, the programme had to be varied by up to $1 million, which the committee approved last month.
The decision needed approval from the regional council before it could go back to the transport agency for final approval.
Transport committee chairman Cr Trevor Kempton, said at a regional council meeting yesterday the variation to fund the business case and detailed design work of the options for the cycle lanes from the Oval to Pine Hill ticked many of the boxes for the committee.
''It means we walk the talk of transport being more than one mode.''
It was also not often there was funding available from the transport agency over and above what was already allocated, he said.
''I recommend the council grabs it with both hands.''
Cr David Shepherd said it was gratifying Cr Kempton suggested the cycle lanes would not affect the route and heavy transport.
It was important any changes provided ''good separation of cycles, traffic and parked cars while maintaining a critical arterial route'', he said.