The City Council on Tuesday approved an agreement for development of Passenger Street as a connection between Main Street and the edge of the Chattanooga Choo Choo property.
Passenger Street goes north by Main Street Meats and The Flying Squirrel bar.
Under the agreement, LIV Development of Birmingham, Ala., will provide engineering plans for the reconstruction of one section of the road closest to Main Street and for a newer section to the north.
LIV will pay for the work on the newer part and the city will fund the part closest to Main Street - after getting the construction go-ahead later from the City Council.
The entire street will then be a public road.
Councilman Chip Henderson said he would like to see the city's portion of the road work come from the water quality fund. He said it should qualify since pervious pavers will be used and there will be stormwater savings to the city.
He said the funds freed up could then go to city paving projects.
LIV is planning a development at the site.