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Hopes have been boosted for a footbridge over the A20 in the centre of Dover.
The construction could replace the existing subway going under Townwall Street from Bench Street to the seafront, says the town's MP.
The project was selected for the next stage of the government's new Future High Streets Fund.
Both Dover and Ramsgate were shortlisted after councils were invited to submit for up to £25 million in grants as part of the fund announced in last autumn's budget.
Dover's bid focuses on the bridge and Dover District Council will received up to £150,000 to develop a business case.
Winning bids will be announced next spring.
In a letter to Dover MP Charlie Elphicke, the Secretary of State for Housing Communities and Local Government Robert Jenrick MP said: “Dover has the potential to be front and centre with bold proposals to deliver housing and investment on the waterfront, which will tackle the unique challenges Dover faces as one of our busiest port towns.
“There was a very high degree of interest in the fund, which received more than 300 expressions of interest and was heavily oversubscribed.
"It is a great achievement for the authority to have made it into the business case development phase.
Mr Elphicke said: “This is hugely encouraging. I have continued to press government ministers on the case for major funding in Dover. It seems we are finally getting through.
“Because it’s vital that we keep building on recent progress. Burlington House and the multi-storey car park were torn down. A shopping and cinema complex rose in their place.
“The seafront is being transformed and we hope to see bars and restaurants on the new marina curve.
“That’s why the connection is crucial. The subway is not fit for purpose. A better link has been badly needed ever since the A20 was built.”
The bid was discussed in November in a meeting between Mr Elphicke, DDC leader Keith Morris and Tim Ingleton, council head of regeneration.
With them was Ashford borough councillor Graham Galpin who sits on the government's expert panel on high street.
The meeting was at Dover's St James' Retail and Leisure Park.
This was opened in 2018 on the site of the car park and the high rise office block Burlington House, which was classed as Dover's ugliest building.
The plans had to show how they would change use of empty commercial properties, improve transport access and boost footfall.
While Dover was unsuccessful in the first selection of 50 areas, it has been selected in the second 50.
The Future High Streets Fund was first announced in the autumn 2018 budget as a £675 million pot, which has since been increased to £1 billion.
A DDC spokesman said: "We are delighted that Dover has been invited to proceed to the next round. We will be looking to further develop plans for a land bridge across Townwall Street that would better connect the town centre and waterfront for pedestrians, which has been a long stated ambition of the Council."
A draft of the Dover Masterplan, which includes consideration of a land bridge, was considered by Dover Town Centre and Waterfront Project Advisory Group in May 2017.
DDC is currently working with the Port of Dover in preparing a Framework Masterplan that will be used for a new Local Plan policy on the Dover Waterfront area.
This will be published alongside the Draft Local Plan in Spring 2020.
DDC explains that a key part of the proposals for the Dover Waterfront area is the existing high street area and Dover Waterfront can be linked.
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