The decade-old $1.1bn Moynihan rail station project in New York has finally moved ahead with federal and state governments and rail operator Amtrak reaching an agreement on the proposal.

The agreement gives the go-ahead for final planning, design and financing for the project and will now be put into a memorandum of understanding.

The project involves reconstructing the existing landmark building of Farley Post Office into a new Amtrak rail station featuring retail stores, offices and a new Madison Square Garden arena.

The new station, until now opposed by Amtrak, is aimed at easing traffic at the operator’s existing Pennsylvania Station.

The project would be funded by the federal, state and city governments and Amtrak and the Port Authority. The state may also seek stimulus money for the project.

Construction is expected to begin in a year.