CEDAR FALLS - City officials have not abandoned plans to develop State Street downtown.

"It's not like the project is screeching to a halt," Cedar Falls administrative services director Richard McAlister assured the mayor and City Council last week.

Plans for a $32 million commercial and residential project along State Street fell through in April after the developer cited a difficult real estate market and the credit crisis. For four years the city had been working with Garrison Companies of Kansas City, Mo.

McAlister expressed confidence the city eventually will find another developer to build on the entire city-owned property.

"I think the economy is going to be a factor," he said. "We will find somebody someday at the right point in time. We had the same issue occur with the industrial park," during the 1980s recession. "After we first founded it, it sat kind of empty for a while."

In the meantime, construction plans are moving forward for road, curb, storm sewer and sanitary improvements. Also, the former Dalton Plumbing & Heating building is set for demolition.

"We need to get rid of that because it's beyond an eyesore," McAlister said. "It's become a safety concern: windows broken out and accessibility."

Soil contamination issues stemming from a former salvage yard on part of the property aren't as severe as expected, he said. After talks with the Department of Natural Resources, one option would be to seal the land under concrete and proceed with construction. The waste contains nontoxic lead, which also can be hauled to a landfill.

McAlister addressed the frequent, unavoidable odor caused by the city's sewage treatment plant near downtown. The smell occurs during low-flow periods, but data show no health consequences.

As a result, the next set of developers may gravitate residential areas to the north, and commercial to the south.

Developers for the State Street project likely will be solicited in early fall, with a list of candidates to the council by early winter, McAlister said. Past performance and financial capabilities will figure into the final selection.

Leading into spring 2010, city officials hope to be negotiating a contract and financial incentives.

But Councilman Kamyar Enshayan questioned the long-term value of investing in an area vulnerable to flooding. State Street borders the Cedar River.

"We all know that the levy provides a false sense of security," Enshayan said. "(In 2008) there were some weaknesses in parts of the levy, in that very area."

McAlister said the city is working to repair and potentially raise the levy near Western Home Communities, 420 E. 11th St., and Cedar Falls Utilities on Utility Parkway, among others.

Since the mid-'90s the city has been meticulously acquiring properties along State Street, from First to Fourth streets.

"We've waited many years for anything to happen along State Street," said Councilman Tom Hagarty. "One developer just endorses the success that downtown will continue to experience."