SEATTLE -- After years of wrangling, Seattle, King County and state leaders have agreed to replace the Alaska Way Viaduct with a deep bore tunnel under Seattle's waterfront.

An official with the knowledge of the decision, speaking on condition of anonymity, told KOMO News that all three parties have agreed to go forward with a plan that would involve money from the state, King County and City of Seattle.

Gov. Chris Gregoire's office confirmed she has reached a decision on the viaduct's replacement, but wouldn't give details. Karina Shagren, Gregoire's spokeswoman, says details will be announced Tuesday at a news conference in Seattle on the waterfront at 8:30 a.m. at the World Trade Center.

"That's wonderful," said Seattle resident Christina Mason. "it seems like it has taken a lot for them to come to an agreement. It's exciting there is finally a decision."

The tunnel decision, first reported by the Seattle P-I, would be paid for with roughly $2.8 billion that the state set aside for the project.

The surface street elements, including a waterfront park would be paid for by the city. The capital and operating investments in transit would be covered by King County. The new tunnel would generally parallel Second Avenue, not along the waterfront.

"The tunnel is one component of a good idea," said Bob Donegan, with the Seattle Historic Waterfront Association. He represents 50 businesses along the waterfront. "We have to fix sections of I-5, we have to make improvements to transit. We have to improve the surface and 70 percent of the traffic that uses the viaduct today is bypass traffic. I think that's where the tunnel component comes in."

But not everyone thinks the tunnel is a good idea.

"I like the elevated roadway the way it is now," said Garnder Congdon. "I liked being able to drive someplace where I can see the water."

And others are balking at the expected price tag.

"I'm personally in favor of redoing the viaduct," said Seattle resident Greg Moon. "It may not be the prettiest option especially with this economy. It makes more sense to go the economical route."

In December, state, county and city transportation officials recommended two final options: a replacement elevated highway, and a network of surface streets.

But then officials delayed an end-of-the-year deadline for choosing the option, since there was still overwhelming response from people who want to have a say.

The mile-long viaduct section of Highway 99 is 55 years old and carries about 100,000 vehicles a day. The viaduct sank 5.5 inches in the years since the 2001 Nisqually Quake, and officials fear it would collapse in a future earthquake.

See photos of what the deep-bore tunnel option would look like