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Councillors voted to include $200,000 in the draft 10-year plan to add to a new place-based community groups fund.
Another option, which Cr Marie Laufiso pushed for, was also included in the draft plan, which would mean $300,000 was added to the fund.
Council community development manager Joy Gunn said there were about 16 officially recognised place-based groups in Dunedin, ranging from small volunteer organisations to larger formally structured organisations with paid staff.
Some groups operated in areas where there was no community board representation while others crossed over with the work of community boards, Mrs Gunn said.
During the debate, Cr Laufiso became emotional as she spoke of her late brother Michael Laufiso's work in the council's community development team and the struggles some residents faced.
Councillors had already voted for millions of dollars to be spent on enhancing the city but the most valuable asset the city had was its people, she said.
''I know people who can't afford a bus ticket to get anywhere or people who don't have internet access and it's them I think about when we talk about this funding.''
Every neighbourhood in Dunedin deserved a place-based worker, Cr Laufiso said.
''I'm speaking as a person with experience working within many place-based groups and seeing first-hand the difference they make.''
Earlier, some councillors had raised concerns about the legitimacy of the groups that could apply for funding.
Cr Jim O'Malley was concerned there would be groups that said they represented a specific community when in fact they represented no-one.
Cr Lee Vandervis thought the money would be better spent if it was not confined to place-based groups.
The council voted 14-1 to adopt the two options in the draft plan. Only Cr Vandervis voted against it.