The Invercargill inner-city development will receive a $10 million investment as part of the government's $3 billion infrastructure investment in the COVID Response and Recovery Fund.

Earlier this year, Finance Minister Grant Robertson and Infrastructure Minister Shane Jones established the Infrastructure Reference Group (IRG) and called for local councils and businesses to submit their 'shovel ready' projects to the IRG in a bid to stimulate the economy with projects that were ready-to-go during the COVID-19 rebuild.

The IRG received a total of 1924 funding applications from various sectors across the country. Those submissions were whittled down to 802 projects, which were presented to the ministers for final consideration. 

The Invercargill inner-city development (Invercargill City Limited) was one of 12 projects announced yesterday by Mr Robertson and Mr Jones that would receive funding. 

The government is drip-feeding the announcements of successful shovel ready projects, with further announcements expected over the coming weeks. 

Yesterday, the government announced the Invercargill inner-city development, which will occupy the rectangular block of building space bordered by Esk, Tay, Dee and Kelvin Streets will receive a $10 million funding boost. 

In a statement issued by Mr Robertson and Mr Jones, the ministers said the new development would create approximately 350 jobs and give "new life to the Invercargill CBD".

"[The CBD] currently poses a considerable seismic risk, has low levels of foot traffic, struggles to retain businesses and lacks the soul and presence expected of a modern CBD," it reads. 

"The project will balance developing a contemporary, functional centre that provides an engaging customer experience while preserving the historical character of the area."

It’s also estimated the new city block development will bring an additional 1500 into the CBD every day. 

On Monday, Invercargill City councillors agreed to invest an extra $16 million into the inner-city development after one of the key investors pulled out, leaving a funding shortfall. 

Invercargill City Council chief executive Clare Hadley said she couldn't yet say how exactly the government intended the investment to be spent, therefore could not confirm if this meant the ICC would now be investing $10 million less of ratepayer money into the project. 

"We are delighted with the announcement and look forward to understanding more about how it is to be applied," she said. 

The Southland region is expected to receive approximately $90 million of the $3 billion allocated for infrastructure projects nationwide.

The $3 billion allocated for infrastructure projects is broken down by the following sub-sets:

• Housing and urban development: $464 million

• Environmental: $460 million 

• Community and social development: $670 million

• Transport (cycleways, walkways, ports and roads): $708 million

The infrastructure projects are in addition to the $12 billion New Zealand Upgrade Programme and existing Provincial Growth Fund investments.

Mr Robertson said all funding approvals were in principle and subject to contract negotiations. Investment values were also subject to change.

About $400 million has been set aside as a contingency as the Government took a "responsible approach to managing spending on behalf of taxpayers".

Mr Robertson said any funds not required in the contingency would be put towards further infrastructure projects, providing an "incentive for local councils to deliver the approved projects on time and on budget," as this would unlock a further potential $400 million of investment.