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The new pound is being constructed inside a shed at commercial boarding kennel and cattery operation Allandale Park.
Owner Brent Baguley is building the complex himself, but will operate the pound under contract to the council.
Council development services manager Kevin Thompson yesterday declined to say what the 10-year contract was worth, citing commercial sensitivity.
He said the council would also pay the company a sustenance fee, per animal, per night, for feeding impounded dogs.
There are also areas where sick animals can be isolated.
All floors were concrete and could be hosed down, unlike the SPCA pound, which is on grass.
That structure would be removed by the end of September, Mr Thompson said.
SPCA volunteers have fed impounded dogs and cleaned kennels at the pound for the council for the past 30 years, but last year the organisation informed the council that the pound was not consistent with the SPCA's nationwide "saving lives" programme.
It would no longer be associated with putting down dogs and, thus, could not have the pound associated with its operation. It gave the council a year to relocate the pound.
Allandale Park was one of five parties that registered interest in running the pound for the council, and the only one that met all of the council's requirements, Mr Thompson said.
It also had the added bonus of the background of being an established boarding kennel and already had the appropriate consents.
Otago SPCA executive officer Phil Soper said after 30 years, the move was "just one of those things". He was pleased that the new pound would comply with new standards for boarding establishments.
The new pound will begin operation on September 1.