Is that what shows on the maps as cycle route 72?
It looks as if half the trackbed is occupied by supermarkets, but it does give rise to another possibility, since we're in the speculative section, but it would probably cost more than just restoring the present tunnel... which I've marked on the screenshot below.
Basically, use the extant half of that trackbed, swing off it past the supermarkets at the edge of a park area, build the line along the inner harbour wall, elevated enough to avoid most sea issues, rejoin the existing line at North Beach. Install a lifting bridge where there is an existing gap in the harbour wall ( on the assumption that a lot of boats going in and out will have tall masts ).
Replace the existing two stations with one, somewhere near the south end of the harbour.
This would allow through services to be maintained and gives a station closer to where one is needed.
However, as I said, it's likely to cost a lot more than just fixing the tunnel - much of the cost would probably be the station and lifting bridge...!!
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