Almost $9 million has been allocated to develop stage one of the New England Rail Trail within two years.
The $8.7m from the federal government will go to Glen Innes Severn Council to construct the rail trail between Glen Innes and Ben Lomond.
It comes off the back of a business case which predicts the rail trail will bring 4000 visitors per year to the region.
Glen Innes mayor Carol Sparks admits she was surprised by the predicted numbers, but said the response from people in the community had been mostly positive about completing the 35km nothern section.
"As expected a couple of people weren't happy, but otherwise everyone was really happy about it," she said.
"We're hoping the Armidale council will come on board and have their application accepted and we can get the whole 103km completed, which would be great."
Armidale Regional Council is responsible for the southern stage of the project, from Ben Lomond, and there is some hope the ball will soon be rolling on that development.
Armidale councillor Peter Bailey said the council has a resolution ready to go committing to it.
"We were actually the first out there trying to get a rail trail, but we've had a few challenges along the way, which we've now dealt with," he said.
"We've put a business case forward and have funding applications in and we're very hopeful we can get the rail trail from Armidale to Ben Lomond funded."
In the past there has been considerable public support to see trains return, rather than a rail trail established.
But Cr Sparks said Glen Innes Severn Council had always been supportive of the rail trail proposal.
"We've had our own committee working on it, and of course we've got David Mills (from Guyra) who's the driving force and we've got Peter Sneikers in Premier and Cabinet who has been very positive and helpful," Cr Sparks said.
"We've just been waiting on councillors in Armidale to support it, but our council has just been unanimous in its support, and very positive."
With the funding now in place, Cr Sparks said she could see opportunities in the community.
"Personally I'd like to see the rejuvenation of the railway stations, because they've been lying dormant for so long. We could do things like cycle hire and coffee lounges, it would be so good."
The Great Northern Rail Line between Armidale and the Queensland border has not carried trains for 31 years. Services were gradually cut at the end of the 1980s due to lack of passengers.
Cr Bailey said he had seen firsthand how a rail trail can dramatically boost tourist numbers.
"My wife's cousin was involved in the Tumbarumba to Rosewood rail trail," he said.
"It took them 10 years to get it, they had opposition from the council, they had opposition from the farmers, and it's only 32km long, but they've had 18,000 people use it in 12 months and 10 new businesses have opened."
Likewise, Cr Sparks said she could see the opportunities that lie ahead.
"The New England Rail Trail will provide farms impacted by climate change and changing weather patterns an opportunity to diversify by providing accommodation to cyclists and walkers coming to experience the rail trail."
Announcing the funding, New England MP Barnaby Joyce said the trail would provide a safe recreational location for cyclists and walkers, attracting an estimated 4000 visitors annually, who he said would spend in excess of $1.6 million annually at local businesses.
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