The decision came after an hour-long debate on the merits of the proposal at the council's annual plan deliberations yesterday morning.
The spending, which passed after 10 councillors voted in favour of the motion, was conditional on the council's debt being below $220 million by the end of the financial year.
The "multipurpose all-weather facility'' would include lights and stands and the school, the council and Otago Hockey would each pay a third of the cost.
The proposal was mooted by the school and Otago Hockey at last week's annual plan submissions and was not included in the council's consultation documents or draft budgets.
While almost all councillors believed the facility would be positive for the city, some raised issues with how it was being funded, utilising council debt.
"We have agreed what to do with spare money and that's to pay off debt,'' Cr Hilary Calvert said.
The proposal was "binding a future council to increase debt'' and presented a "seriously flawed resolution''.
Cr Aaron Hawkins said he supported the proposal but could not support it "right now''.
He was concerned the increased attention the proposal received as a result of the co-investment of King's High School and Otago Hockey could set a precedent.
"We risk funding the communities with the deepest pockets rather than the greatest need and it concerns me,'' he said.
Cr Lee Vandervis said he agreed "entirely'' with Cr Hawkins and
opposed committing to funding the project.
Cr Neville Peat said he saw the "positives'' of the proposal but believed it should be "parked for one more year''.
Council parks and recreation planning manager Jendi Paterson said King's had the funds available at present and wanted to develop the facility in conjunction with a wider sports development at the school.
Cr Chris Staynes said if the council's debt allowed for the investment, the "opportunity is too good to miss''.
Cr Doug Hall said the economic benefits to the city were reason alone to support the development.
Dunedin Mayor Dave Cull said the partnership between the groups was "a huge advantage''.
"I'm very much in support of this proposal,'' he said.
"There's a definite need. I think this is a great opportunity.''
Speaking in support of the motion, Cr Richard Thomson said council staff had told councillors the development would be "considered a high priority''.
"This is about investment in South Dunedin and we have heard time and time again about the need for that. The community tells us they feel whenever investment goes into the city, it goes elsewhere.''
However, the investment would occur only if the council outperformed its own budgetary forecasts, he said.
Group chief financial officer Grant McKenzie said the council had forecast debt to be $247million at the end of this financial year.
That forecast had been revised to $220 million and the council was on track to improve on that further, he said.
Council infrastructure networks general manager Ruth Stokes described the proposal to councillors as "an ideal project for the council to support, if it was of a mind''.
The motion to invest $500,000 in the annual plan in the facility, with $10,000 in annual upkeep for 10 years following its completion, was passed with conditions.
The conditions
A motion to invest $500,000 in a hockey facility at King's High School, with $10,000 in annual upkeep for 10 years, was passed with the conditions that:
•Council debt was lower than the forecast $220 million.
•Dr Bidrose confirmed funds were available.
•Appropriate terms and conditions for public use were met.
•A way to fund the $10,000 maintenance was found.
•The Ministry of Education formally agreed on the location at King's High School.
•Infrastructure in the area could support future demand.
