Not exactly right,pretty sure your option 2 was also ruled out due to cost.
Option 2 was the original plan submitted by the Baird Government in 2016
Option 2 was then cancelled by the Berejiklian Government for a FULL demolition and rebuild of ANZ.Cost was not a factor as the rebuild was not much more than the Baird redevelopment.
Due to the uproar created by the bald hanky guy,they gave in to pressure to release a cheap option to appease the media and released Option 1(pre election)
The money has always been there to even completely rebuild the venue.
Now that the Government was re elected,do not be surprised to see at least option 2 on the table.
This current government never wanted Option 1