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Councillors at yesterday's 10-year plan deliberations voted 13-2 to progress the more expensive option for the upgrade, rather than a cheaper $35million alternative.
But councillors also backed Cr Kate Wilson's move to explore a targeted rate against nearby property owners, who stood to gain the most financially from the improvements.
The project would include roading, footpath and streetscape improvements, and incorporate greater use of pedestrianisation, to address public concerns about the central city's shabby appearance.
The work would be timed to coincide with the renewal of water pipes and other below-ground infrastructure, covered by separate council budgets, to maximise efficiencies.
Cr David Benson-Pope backed the $60million plan, saying Dunedin was on ''a bit of a roll'' but the central city had been ''allowed to look a bit tired''.
''It's absolutely essential that we commit to this work.''
Mayor Dave Cull agreed, urging his councillors to ''dream big and aspire'', while deputy mayor Chris Staynes said Dunedin's main street needed to be protected from the rise of internet shopping.
That could be done by encouraging pedestrianisation, which would draw more shoppers to the area, he said.
If the council did nothing, ''we will see the death of the centre of our city'', Cr Staynes said.
''I firmly believe that.''
Cr Lee Vandervis disagreed and supported the cheaper $35 million option, at least as a starting point.
An ''agenda'' of pedestrianisation, coupled with a dwindling number of car parks in the central city, was a threat to Dunedin's vibrancy, he argued.
He pointed to Christchurch as an example, where pedestrianisation prior to the 2011 earthquakes had created what he described as ''a windblown wasteland'' in the central city around Cathedral Square.
Cr Aaron Hawkins dismissed such ''alarmist'' comments, saying the plan would create a central city ''that is a destination, not a thoroughfare''.
Cr Wilson was ''nervous'' about the spending, but said the central city needed to match developments elsewhere to avoid an ''imbalance''.
But the beneficiaries of the central city improvements needed to contribute more, and a targeted rate of 10% could raise $6 million towards the cost, she suggested.
Her resolution, asking staff to investigate a targeted rate or other mechanism, meant a report due in 2018-19 would detail options.
Earlier, council transport group manager Richard Saunders told the meeting even $60million would not cover all projects that were envisaged by the central city plan.
That included the Octagon itself, which would be considered separately, and public art, which did not feature.
However, the plans could be ''scaled'' to include more or less of the central city, depending on budget constraints, and a NZ Transport Agency subsidy would cover about 25% of the cost.
Construction was due to begin in 18 months, but only after detailed design work, public consultation and further council input, he said.
Businesses could expect ''significant'' disruption, including one major work site on George St for two and a-half years.
Options to manage that would be discussed, but the city would be a more ''user-friendly'' space, while still providing for vehicles, once the upgrade project was completed, he said.