St. Paul City Hall's desire for a downtown grocery store is buoying plans for the controversial Penfield project, a $62 million city-funded apartment building with a place to buy mangoes, triple-cream Camembert and dry-aged beef.

The City Council, acting as the Housing and Redevelopment Authority (HRA), voted 4-3 on Thursday to move ahead with the project. A 28,000-square-foot urban-style Lunds grocery store akin to the one in northeast Minneapolis is planned on the ground floor of the six-story building, with 253 market-rate apartments above.

The Penfield would be on a full city block at the northeastern edge of downtown, just a block from the Central Corridor light-rail line. A park is planned adjacent to the building at the recently demolished Pedro's Luggage store site.

The project hinges on approval of a $40 million loan from the U.S. Department of Housing and Urban Development (HUD). That money, along with $15 million of primarily tax-increment financing funds and enterprise cash, would cover the cost. A Met Council grant of nearly $2 million and the $3.5 million cost of the land comprise the rest of the project. Rents would range from $1,055 for a studio apartment to $1,890 for a three-bedroom, according to city documents.

Cecile Bedor, city planning and economic development director, said the financing package had to be approved to complete the HUD application, which will be submitted next month. She expects a response from the agency within a few months.

"If they say no, then we're back to square one," she said, adding that the agency's approval should comfort residents about the risks because HUD is conservative and would renegotiate the mortgage if rents fell short. Bedor isn't concerned: "This project's not going to get in trouble."

The proposal, however, is divisive inside and outside City Hall.

Private developers and rental property owners complain about tax dollars going into a project that competes with their businesses. The three opposing council members wrote a lengthy commentary article detailing their distaste for using the entire pot of available -- and scarce -- development money for one project while others go begging.

Voting against the project were President Kathy Lantry and Council Members Melvin Carter and Russ Stark. Voting for it were Council Members Dan Bostrom, Dave Thune, Pat Harris and Lee Helgen.

Supporters, including Mayor Chris Coleman, say the development plugs not just a physical hole but a need for downtown residents to be able to walk to a grocery store. They note that other developers have tried and failed at the site before the city stepped up last year.

Bob Spaulding, board member of the St. Paul Downtown District Council, encouraged support for the project, saying a full-service grocery store has been prized for the 12 years that he has lived downtown. He called the Penfield a "transformative project" providing a "unique chance to change downtown's competitive position in the regional marketplace."

Bernie Hesse, United Food and Commercial Workers Local 1189 political director, said Lunds' 10-year lease is a sign the project will do well. "If Lunds didn't think they were going to hit a home run, they wouldn't be screwing around with this," he said.

Opponents spoke against subsidizing market-rate housing and risking development dollars. Cheryl Golden-Black said, "We're all struggling. Any risk at this point that would burden the taxpayers further is too big, way too big."

The HRA will develop the project, but the private Village Green would be expected to manage the rentals. The Penfield property sits on a block bounded by Robert, Minnesota, and E. 11th and 10th streets.

Rochelle Olson • 651-925-5035 Twitter: @rochelleolson