Plans for a Hy-Vee grocery store at 50th and O streets may be scrapped after the City Council declined Monday to commit additional public funds to build a new street near the project.

Saying the responsibility of extending 50th Street from O to R streets and making related improvements should fall to the private businesses and not come out of taxpayers' pockets, the council voted 6-0 to oppose changing the city's redevelopment agreement with Hy-Vee Inc. Councilwoman Robin Eschliman was absent.

In June, the city promised to extend 50th Street if Hy-Vee helped revitalize the blighted, four-block area by building a new store. At the time, the city planned to front $433,000 toward the $1.66 million cost, which included the street, ornamental lighting, sidewalks and trees. The balance would fall to nearby property owners through a special assessment district.

But property owners refused to sign on, saying the benefits didn't fall much farther than Hy-Vee. Getting the necesary support of 51 percent of benefiting property owners has been the roadblock, said attorney Kent Seacrest, who represented Hy-Vee during testimony Monday.

"Today we haven't been able to pull that off," he said.

City officials cut the cost to $1.035 million by reducing the road's width to residential standards, which puts it at 27 feet wide — narrowing the street by seven feet as compared with the original plan.

Officials earlier this month expressed their reservations about committing more money to the project, after already having committed more than $750,000 in tax increment financing to the project.

Tax increment financing is an urban development financing tool in which the portion of property taxes generated from the increased value of the property is used to pay off bonds that fund such things as demolition, utility relocation and sidewalk construction.

Seacrest argued the public stood to gain if a deal went forward, by way of improved circulation on O Street and a spark to redevelopment that would draw in more sales and property tax revenue. He also argued that if they city didn't move ahead on the plans, it would devalue the city's $12 million investment into the O Street widening.

"If you don't want to do this, Hy-Vee can go away and that's your call," he said, later adding that Hy-Vee has never worked so hard or put so much money into a project.

City officials and Hy-Vee executives were in agreement that the road needed to be built, but disagreed on who should foot the bill.

Council members also commended Hy-Vee in its efforts, with Vice-Chair Dan Marvin saying he hopes the grocery store chain won't "turn sour" on Lincoln.

Following the meeting, Dennis Ausenhus, Hy-Vee's senior vice president of real estate and engineering, expressed disappointed in the council's decision.

 “We’re going to have to step back and see what options are available to use at this point in time,” he said. “… It doesn’t look favorable.”

Hy-Vee is due to close on the land Jan. 29 with current owner Abram LLC. The land deal originally was to close Dec. 14, but executives opted to push it back because the 50th Street issue was unresolved.

Reach Jean Ortiz at 473-7107 or jortiz@journalstar.com