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Mayor Peter Chin confirmed yesterday University of Otago proctor Simon Thompson met him several weeks ago and gave him a cheque for $1500.
The money was "acquired from various students" and "mine is not to reason why or how", Mr Chin said.
"I think it is an appropriate gesture of appeasement in terms of all the issues that have arisen."
The money would be given to Keep Dunedin Beautiful to maintain hanging baskets in George St, he said.
The relationship between the city and university students had "healed hugely" and he hoped no "issues" would arise in the future.
While Mr Thompson confirmed a donation had been made, no further comment was available from the university last night.