A blighted neighborhood in Newport, cut off from the rest of the city when a new Hwy. 61 was built, would see a turn in fortunes in a sweeping redevelopment plan.

Planners envision injecting new life into about 40 acres of land once known as "Little Chicago" and now christened "Red Rock Gateway." That land, near where Hwy. 61 intersects with Interstate 494, holds substantial promise for a 10-fold increase in Newport's tax base, said Barbara Dacy, executive director of the Washington County Housing and Redevelopment Authority (WCHRA).

That's because redevelopment of that aging and isolated commercial and industrial area could spring from a transit station that will be built next year as part of the ambitious Red Rock Corridor project.

"There could be many development and redevelopment projects that could occur over the next several years," Dacy told county commissioners last week. "From a regional perspective, Red Rock is a key piece to an overall economic development opportunity."

The WCHRA and the City of Newport have worked together on a proposal to build 5,000 square feet of retail space, 450 apartments and 20 townhomes, expand Lions Park, improve utilities and streets, and construct walking trails. The area along Maxwell Avenue, with the transit station as its centerpiece, would undergo a revival that could take years and would involve private investment.

"The goal is to have a logical high-density pattern to support the transit station," Dacy said. Future tax-increment financing could supply some of the revenue for redevelopment, she said.

An abandoned Knox Lumber building, standing on the portion of land where the transit station will go, has been declared blighted and will be demolished. The Washington County Regional Rail Authority -- the County Board under a different name with a different mission -- acquired the site in 2009.

The transit station land is about one quarter of the total acreage under consideration in the larger redevelopment plan.

Funding for more than half of the $5.8 million cost of the transit station will come from a quarter-cent sales tax that five metro countries enacted in recent years to raise money for transit development. Land acquisition and station construction account for most of that cost.

The sales tax revenue is administered by the Counties Transit Improvement Board (CTIB), which according to Washington County figures will provide about $2.8 million for the Newport project. An additional $1.8 million will come from state funding, $770,000 from Washington County and $475,000 from federal sources.

The 30-mile Red Rock Corridor will run north from Hastings, with stops in Cottage Grove, Newport and Lower Afton Road in St. Paul, before connecting to St. Paul's Union Depot, the University of Minnesota and the downtown Minneapolis Interchange Station. Future plans call for extending the corridor into Goodhue County.

The Newport transit station will open next summer. Commuters will park in a 200-stall lot and ride express buses. Officials want to build ridership for the corridor in anticipation of someday adding a possible commuter rail.

"This project is good for Newport but it's also great for Cottage Grove and Woodbury," said board chairman Dennis Hegberg.

The County Board has been split over participation in CTIB. Two commissioners -- Bill Pulkrabek and Autumn Lehrke -- have indicated interest in repealing the tax.

"We're one vote away from getting out of transit," Commissioner Gary Kriesel said during the workshop last week. He wanted to know what would happen to the Newport project if Washington County repealed the tax.

Newport falls within Lehrke's district and she said that she supported transit in that city.

"I just want to make sure we know what we're signing up for," she said.

Kevin Giles • 651-925-5037 Twitter: @stribgiles