But one city councillor warned the pricey upgrade wouldn't stop the flooding.

Councillors voted unanimously to award a $937,000 contract to Duggan Civil to carry out the much-needed upgrade.

The street was flooded twice in a month in 2021, causing more than $1 million damage to a nearby caravan park, inundating homes and sheds and submerging entire backyards.

Warrnambool has now outgrown the 19^th century tunnel under Japan Street, and the new works would mean the construction of an underground "cell' to retain stormwater from the system with a capacity of 900,000 litres.

Five pits in the area would fast-track the floodwater entering the system via a stormwater pump.

Cr Ben Blain said Japan Street had been an ongoing issue for many years and these works were another step in trying to stop it from flooding.

"Look, this won't stop the flooding, there's still a risk with the heavy downpour," he said.

"But it's another step in the right direction to try and protect one of the lowest lying areas of our city.

"Drainage is one of those things that when it's working well, no one complains, and it's something you never see.

"It's nearly a $1 million project and if it works well no one will see it and no one will complain."

Cr Blain said the federal government chipped in $800,000 for works in Japan Street and another $400,000 had come from the city's drainage fund.

Cr Richard Ziegeler said off all the projects the council had undertaken for the soggy area, this one actually looked like it might have an effect.

"It's probably not the be all and end all," he said.

"I think we're on a hiding to nothing given that that particular area has always been wet and soggy through the winter time."

Cr Max Taylor said for as long as he could remember, drainage issues within the Japan Street area had resulted in damage to property every couple of years.

Cr Debbie Arnott said she was quite excited about the works.

"For years and years and years there's been flooding issues. I feel sorry, particularly for the residences and caravan park," she said.

"Hopefully this is a solution that can provide them with some relief."

The six councillors at Monday's meeting voted unanimously to award the contract.

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