The North East Rail Trail is set to go ahead after the federal government recommitted $1.47 million to the project, following the expiration of previous funding last year.
Dorset Council was hopeful of having a development application submitted for the cycling trail from Lilydale Falls to Scottsdale "within weeks", according to mayor Greg Howard, with the project to go through the standard planning approval process.
Initial federal funding expired last year, but unlike before, the new funding - from the Community Development Grants program - does not require a council co-contribution. The council instead plans to use the sale of rail infrastructure on the section to fund the remainder of the cost.
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The total project was estimated at $2.94 million initially, but this was reduced with plans for the Launceston and North East Railway to use a 20-kilometre section from Lilydale to Turners Marsh for a heritage railway.
Cr Howard said the federal funding flowed following constructive discussions with Bass Liberal MHR Bridget Archer and Infrastructure Minister Michael McCormack last year.
"It puts us in front of where we were with the last lot of funding," Cr Howard said.
"The $1.47 million still won't build the entire length. We're assuming that the vast majority of that gap will be provided by the sale of rail."
He hoped that the long-term disagreement between supporters of the rail trail and the heritage railway over the use of the line had been put to bed and that both groups could "get on with it".
Ms Archer said it was an exciting outcome for the North East.
"I was determined to still ensure the funding was delivered," she said.
"This funding supports job creation and tourism, which is more important than ever, particularly as the region looks to recover from the economic challenges of COVID-19."
'Both projects are equally important to the area'
Launceston and North East Railway remained hopeful of having a "shared" section from Lilydale to Wyena.
LNER chairman Ralph Berry said it was good news that Dorset Council had received funding for the rail trail.
"We're trying to get a similar grant, so their success at getting that funding should encourage us to get more funding as well," he said.
"Both projects are equally important for the area.
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"The Legislative Council report recommended that the Wyena section be shared with the bike riders, so we'd be happy to be a part of that."
LNER was developing plans for a terminus, workshop and museum at Turners Marsh to act as the base for the heritage rail. A late 1930s Gardner diesel carriage with an engine was also being restored at Karoola for use on the heritage railway.
The first section involves visitors using a people-powered rail rider from Turners Marsh to the gorge near Wattle Road.
Mr Berry said the heritage rail could work well in conjunction with the rail trail.
"We could get two great projects," he said.
"They get different sorts of people into the area."