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Dunedin City Council planning and environment committee chairman Cr David Benson-Pope floated the idea at last week's annual plan meeting.
If it progressed, a targeted rate could be used to raise extra money from central city businesses and property investors, and possibly even the University of Otago, if they were deemed to benefit from the upgrades.
Chamber chief executive Dougal McGowan said there had been a variety of reactions to the idea from businesses, but it had the potential to become "quite a contentious issue''.
"Where's the paper behind this?''
How it would work was unclear.
Mr McGowan was seeking a meeting with Property Council New Zealand representatives in Dunedin to discuss the idea.
"When you hear a number like 10%, it's always quite scary.''
Businesses were already facing rising wage costs and rates bills, and could expect a drop-off in trade when the construction of streetscape improvements began, he said.
"There's a lot of unknowns really. It's going to be a pretty big issue.''
The parties affected would be those deemed to benefit financially from the $60 million central city upgrade and $20 million tertiary upgrade.
The targeted rate would be used to pay only for streetscape improvements - such as new paving and furniture - and not the cost of underground work such as new power cables.
A special consultative procedure (SCP) would be used to give the public - including those expected to pay the extra bill - the chance to have their say.
Councillors at last week's meeting voted 10-2 to note the proposal, which would be considered through the SCP outside the council's annual plan process.