A large-scale hotel is far better than a large-scale apartment complex being built on the edge of the Kansas University campus, city commissioners agreed Tuesday.

Commissioners at their weekly meeting unanimously approved the Oread Inn project – a seven-story, $37 million hotel project slated for the area near 12th and Indiana streets.

The project received nearly an hour’s worth of public comment – including strong support from the business community but concerns from historic preservationists. In the end, though, commissioners approved the project after determining it would improve the prospects of the adjacent Oread neighborhood.

“What is probable if this (hotel) project doesn’t happen is a high-density residential apartment development,” City Commissioner Rob Chestnut said of the site that was the former home of The Crossing bar and a Yello Sub restaurant. “I think that would be the absolute worst-case scenario for the neighborhood. It would exacerbate a problem that the neighborhood has already told us they are worried about.”

Commissioners also unanimously said they were comfortable with allowing the project to use future tax revenues generated by the project to help pay for parking, street improvements and other infrastructure projects in the area. Commissioners approved the use of tax increment financing and a transportation development district after being assured by a city-hired consultant that the city does not face any financial risk if the project did not live up to financial projections.

“There’s a lot of risk there, but the developers are shouldering the risk and you have to give them some credit for that,” David MacGillivray, a consultant with the Springsted financial consulting group, told the city.

Under the deal that commissioners were briefed Tuesday, the development group – which is led by members of the Gene Fritzel Construction Co. – would privately finance the entire $37 million project, including about $11 million in costs for parking and public infrastructure improvements.

The development group then would be repaid – potentially – for the $11 million in parking and infrastructure improvements through new sales and property taxes generated by the hotel project. The deal also would allow the developers to be repaid for their interest costs on the $11 million worth of improvements.

But the city consultants estimate that the tax revenues won’t come close to paying for the full $11 million worth of projects. Instead, the consultants estimate the tax revenues only will pay for about $6 million of the cost. The remaining $5 million and interest costs would be paid for by the developer.

The project – expected to have 92 hotel rooms and 14 condominium units – received large scale support from business leaders in the Lawrence Chamber of Commerce who told commissioners that the project would be a valuable addition to the community during tough economic times.

“This is the most significant infill development in the community in years, and it is great that it is locally driven,” said Cindy Yulich of Emprise Bank, a member of the chamber’s board of directors.

The project is expected to employ about 200 people and pay about $40 million in wages during a 20 year period, developers said. A large part of its business plan is to attract new conferences and other events that want to be close to the Kansas University campus.

Historic preservationists, though, said the design of the building was flawed. Some said it didn’t do enough to fit in with the historic neighborhood. Dennis Domer, a faculty member of KU’s School of Architecture, said the design of the building – based on 1700s English architecture – isn’t appropriate for what will be a landmark building in the city.

“We deserve architecture that would stand the test of time,” Domer said. “That would call for a contemporary building.”

Tuesday’s approval was a major step for the project, but county commissioners and school board members now have 30 days to veto the project’s use of tax increment financing.