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Prime Minister John Key announced yesterday the money would be available as grants over the next three years, through Tourism New Zealand, for new cycleways he described as "great rides".
"This represents a pragmatic approach to developing a uniquely New Zealand set of scenic cycling experiences that showcase the best of what New Zealand has to offer."
In order to maintain momentum, Mr Key said he intended to announce on June 30 "specific projects" to form the first sections of the national cycle network.
Otago has several cycleway proposals and two of the Dunedin City Council's loudest cycle advocates believe the city is well placed to take advantage of the new funding.
Cr John Bezett said yesterday he was "delighted" with the funding announcement, while Cr Michael Guest said the city had "projects on the board that can be started within weeks if we have that sort of Government money".
"I think immediately, Maia to Port Chalmers."
However, he acknowledged there "was always the risk" Dunedin would miss out if it did not act quickly.
"All of us will make sure we put our hand up straight away, like today or tomorrow, for a share of that.
"We were rather horrified that we got very little, if any, of the last chunk of [strategic roading] money after the election."
Infrastructure services committee chairman Cr Andrew Noone said the council's plan for a cycleway around Otago Harbour from Aramoana to Taiaroa Head "probably ticked a number of boxes" for funding.
"It's obviously got tourism potential.
"It's got the wow factor in terms of being able to follow the coastline, so I can see that certainly some of our aspirations in the cycleway network could well meet the criteria for this funding."
One proposal gaining momentum in Dunedin is for an 8km cycleway between the city and Mosgiel, passing through two old rail tunnels.
Cr Bezett said, "That is a really exciting prospect for tourism in the South. That's well into the future but something we are looking at."
Dunedin Tunnels Trail Trust spokesman Gerard Hyland said the funding announcement was "absolutely brilliant".
Mr Key said an advisory group to be set up would look for projects with "strong brand image".
The route would be influenced by "pre-existing cycleways, facilities and tourism attractions".
The $50 million would create jobs through design and construction, while creating a "high-quality tourism asset", he said.
Council senior traffic engineer Bruce Conaghan said staff were beginning to prepare a cycleway "strategy" that could incorporate a cycle loop from Dunedin to Alexandra, via the two Dunedin tunnels and the Central Otago Rail Trail, then back to Dunedin via Roxburgh, Lawrence and Milton.
Queenstown Lakes District Council transportation manager Denis Mander said his council's emphasis was on improving local tracks and trails and it was planning to upgrade the route to Kelvin Heights.
Venture Southland is in the early stages of investigating a cycleway from Kingston to Bluff.
Mr Key said funding criteria were still being developed but priority would be given to projects demonstrating "a commitment to co-funding".