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Sparc confirmed a $1 million grant for the two-storey building yesterday, meaning work can now start to have the building ready in time for the Rugby World Cup next year.
The Dunedin City Council, which will own the building through its Dunedin Venues Ltd company, will meet the remainder of the cost.
Carisbrook Stadium Trust chairman Malcolm Farry said the decision to proceed with the project - approved almost unanimously by the council at a meeting yesterday - was "almost as exciting as getting the stadium on its way".
"It will have significant, huge advantages for this city."
The academy's move from its home in the former art gallery at Logan Park has been on the agenda since 2005, with the cost included in the council's $15.7 million Logan Park redevelopment plan.
The council's contribution will come from that budget, which has been approved as part of the council's annual plan, meaning no further impost on ratepayers than that already signalled.
Mr Farry said academy users would have access to a running track to be created under the stadium's roof, which could be used all year round.
There would also be input from the scientific community, the University of Otago and Otago Polytechnic, alongside the technological innovations of Dunedin businessman Ian Taylor and access to elite coaching.
Both the Otago Rugby Football Union and the Highlanders have confirmed they will take leases at the new building.
Sparc has agreed to conditional funding of $200,000 for fitting out the building with dedicated coach and athlete services.
Mr Farry said the sporting hub the building would eventually become would rival the results achieved by the Australian Institute of Sport.
For departing academy chief executive Kereyn Smith, yesterday's decision was "the icing on the cake" after her decade of work for the organisation.
Athletes at the academy would have not only the facilities in the new building and the stadium, but direct access to nearby Logan Park.
A report to yesterday's council meeting said completing the building before the world cup would have great advantages for the stadium's operation.
The report, from community life general manager Graeme Hall, said it would allow the stadium's media facilities to be relocated to the north stand, meaning extra corporate facilities where media would have been in the south stand, and allow television coverage to include more advertising on hoardings and banners.
Dunedin Venues Management Ltd chief executive David Davies told the meeting the corporate facilities would add up to $2 million to the stadium's budget over the period they were leased, and the advertising "hundreds of thousands of dollars".
The 1700sq m academy building, which would be built above a one-storey block already beside the north stand and run about three-quarters of the way along the stand, would cost about $1.9 million less than the other option, a stand-alone building on Logan Park.
It would extend over the footpath in front of the stand, providing cover for spectators queuing in bad weather.
Mr Hall said detailed design work would begin now the project was approved, with the tendering process to begin early next year.
Councillors at the meeting accepted the advantages of a building at the stadium, and the facilities that would come with it, compared with a more expensive building elsewhere.
Mayor Dave Cull and Crs Neil Collins, Jinty MacTavish, Kate Wilson, Andrew Noone, Colin Weatherall, Paul Hudson, Richard Thomson, Lee Vandervis and Chris Staynes voted for the project, while Cr Teresa Stevenson abstained.