After years of being unenthusiastic, the Government is now willing to help fund Auckland's inner-city rail link. But under its proposal, construction won't begin until 2020 - five years later than the present council plan.
Prime Minister John Key said it is unrealistic to expect Auckland ratepayers to bear the cost of the $2.86 billion tunnel below the downtown area alone, but wouldn't disclose on Wednesday exactly how much the Government is to contribute.
"It'll have to be paid for by a combination of sources - it won't just be taxpayer funds. Auckland will also have to find ways of paying for its contribution. But I don't think we can realistically expect them to pay for all of it."
Mr Key said the Government has different options to find the money, including the Future Investment Fund, which is made up of earnings from the partial sale of State-Owned Enterprises.
"It's not realistic for Auckland to pay for it fully themselves; the Government will have to put in a contribution. It's also not realistic, I don't think, for those resources to come out of the national land transport fund, because that would take away from roading projects or rail projects around the rest of the country."
In the past, the Government has questioned how effective the rail link would be in reducing the Auckland's traffic congestion.
Labour's spokesman for Auckland Issues Phil Twyford said Wednesday's announcement represents a major change of heart.
"They've been bagging the city rail link relentlessly for the last few years. They have hated the city rail link, they've mocked it and they've treated it with contempt. To now come around and say they're going to support it - that is the U-turn of the century."
But the Prime Minister denied that, saying the Government has never ruled out making a contribution. Mr Key said he would announce more details in Auckland on Friday.
Mr Twyford said it would be a bitter pill for Aucklanders to swallow if the Government's contribution is to be funded by partial sales of SOEs "given that most of them are opposed to asset sales."
Great day for Auckland - mayor
Auckland mayor Len Brown said the Government's decision to back the construction of the rail tunnel marks a great day for the city.
The 3.5km tunnel is the council's top strategic project and will complete a rail loop around the central business district. The council argues it is needed to make the most of the rail network and transform the inner-city.
Mr Brown said on Wednesday that the Government might pay half of the project and the city still has to find about $500 million. He said planning and preparation is well underway and hoped the Government could be persuaded to start construction earlier than 2020.
"We maintained through the most recent study of the city centre transport projections that we will be near gridlock in five to seven years, in the CBD area in particular. So all of those issues we will now start the next round of discussions - but this is a great day for Auckland."
Mr Brown believed the decision has been helped by factors including an improving economy, progress in rebuilding earthquake-hit Christchurch and stronger argument from Auckland.
"Every report we were asked for we were able to show a stronger and more compelling case for it and also, Aucklanders were just increasingly saying, 'For goodness sake, get on with it.' So all of those factors I think have come home to bear on the Government recognising that it's probably timely."
Mr Brown said the council is continuing with its planning and buying properties along the route that may be needed.