UPDATED 03/22/11 6:14 a.m.

CHICAGO (CBS) – The City Council’s Zoning Committee on Tuesday signed off on redevelopment of the old Lincoln Park Hospital that has won over the lame-duck alderman, but divided the community

The Zoning Committee’s unanimous vote followed a 2 1/2-hour debate that has spilled over into the 43rd Ward aldermanic run-off.

LISTEN: Newsradio 780 Political Editor Craig Dellimore reports

Candidate Tim Egan supports the plan to replace vacant hospital buildings on a three-acre site, located on Webster Avenue just east of the intersection Lincoln Avenue, Geneva Terrace and Larrabee Street.

The plan by Sandz calls for one existing hospital building to be converted into high-rise condo tower, and for a second residential building called “The Flats” to be constructed on the site. The project also calls six floors of medical offices in an existing hospital building.

But the most controversial provision in the development, which is called Webster Square, is the planned construction of a Fresh Market grocery store in the old hospital parking garage right across from vintage homes.

Egan’s opponent, Michele Smith, is dead set against the project. She wants to put the grocery store at the nearby site that Children’s Memorial Hospital plans to vacate next year when it moves into a new facility in Streeterville.

Instead of passing the hot potato to her successor, retiring Ald. Vi Daley (43rd) signed off on the project and convinced her colleagues to follow zoning protocol by deferring to the wishes of the local alderman.

Daley argued that she had hosted five large community meetings on the project and wrung a series of concessions from Sandz Development Co.

Among the changes was a six-foot setback in the two new floors that would be built on the old hospital building set for condo conversion, and a reduction in height from 55 feet to 47 feet for the “Flats” building, project architect John Lahey explained at a Feb. 28 meeting.

Also, delivery trucks for the Fresh Market store would no longer back in from the two-lane Webster Avenue under the revised plan, Lahey said at the meeting.

On Tuesday, Daley also warned that taking a pass on the project could leave Lincoln Park with an empty hospital building for years to come.

“I’m worried about that. It could sit vacant for a long time. And in 2012, Children’s is gonna be leaving. That’s only a block away. All the sudden to have two vacant properties sitting in our neighborhood — it’s not good for our community,” Daley said.

Kenneth Dotson, who lives across the street from the old hospital, said the neighborhood needs “additional and modern shopping” that’s easily accessible to residents.

“I increasingly find myself having to get in a car to find a modern grocery that meets my needs,” Dotson said.

Richard Harris added, “Further deterioration and economic stagnation of the site as it now exists poses a greater detriment than the perceived inconveniences.”

Residents opposed to the project argued that trucks making grocery store deliveries would clog the streets of the already congested neighborhood, bringing an invasion of rats along with them.

“This street is not big enough. It can’t handle it,” said Barbara Schaffer, who lives in the 2200 block of North Hudson Avenue.

But not all neighbors agreed with the concern.

“There’s not going to be a traffic problem there. There is not,” said neighbor John Dennis. “And the other thing is, most people in our neighborhood – we live in a wonderful neighborhood – we walk to the grocery store, and the people that live south of Webster don’t have a grocery store, and so it will be a wonderful idea for them to walk up and get some groceries.”

But there is actually another grocery store nearby. Some neighbors have expressed concern that the Fresh Market would take business away from Carnival Foods, a small neighborhood grocery store located about a block away at Lincoln, Cleveland and Dickens avenues.

At the Tuesday meeting, some neighbors also argued that the zoning change for the grocery store could pave the way for a big-box store someday, ushering in even more traffic.

“This assumption that Fresh Market is there in perpetuity is crazy. And when that zoning gets changed, there’s gonna be a lot of property that can be tall and high and massive. It is a travesty for the community,” Schaffer said.

Resident Diane Graham-Henry added, “If you open the door with this zoning, we could have big-box. We could have all sorts of unsightly possibilities in our neighborhood.”

Former Ald. Martin Oberman (43rd) warned that a full City Council vote on the project would not be the final word.

“There’s going to be litigation over this project if it goes through as is,” he said.

The Chicago Sun-Times contributed to this report, via the Sun-Times Media Wire