Updated 05/16/13 – 2:03 p.m.

CHICAGO (CBS) — City Hall has unveiled plans to build a new arena for DePaul basketball at McCormick Place, as part of larger plans to upgrade the convention center and redesign much of Navy Pier.

Mayor Rahm Emanuel announced the $173 million arena Thursday morning as part of a program to boost city tourism, dubbed “Elevate Chicago.”

The 10,000-seat arena would be built northwest of McCormick Place, on a parcel of land bounded by 21st Street, Indiana Avenue, Cermak Road, and Prairie Avenue.

The city would provide $55 million in tax increment financing money to purchase the land, according to Jim Reilly, CEO of the Metropolitan Pier and Exposition Authority, a state and city agency that runs McCormick Place and Navy Pier. DePaul University would contribute half of the $140 million in construction costs, with the other half coming from the MPEA.

Reilly defended the decision to use public funds to help build a stadium for DePaul, because he said the arena would serve as an event center for McCormick Place much more often than as a basketball arena. He said trade shows and conventions that use McCormick Place needed a hall with 8,000 to 10,000 seats for their general sessions.

“It’s sort of the reverse of what some of the stories have said. DePaul is really helping us build a building that we would need anyway,” Reilly said.

In addition to serving as the home to the DePaul Blue Demons basketball team, the arena would host conventions and trade shows that are too small for the larger McCormick Place buildings, but too large for Navy Pier.

“Yes, DePaul will play there, but there will be a lot more events there,” Reilly said. “There will be 18 basketball games, but there’ll be 75 or 100 other kinds of events that will occur.”

Emanuel said he was willing to commit public funding for a stadium for DePaul and other entertainment venues at McCormick Place and Navy Pier, even though he wasn’t willing to do the same to renovate Wrigley Field, because the arena at McCormick Place would be a public facility with other uses.

“Medium-sized and small conventions will now become an opportunity and a market we never participated in,” he said. “We will have concerts, which we did not have before, and entertainment for the big shows that never could do that before.”

He said he also expects graduations and other events at the arena; and he noted DePaul will pay rent to use the site.

Not everyone is happy about the project.

Tina Feldstein of the Prairie District Alliance says creating vibrancy with hotels and restaurants is fine, but adds: “The arena is the issue.”

“There are plenty of other arenas we can use throughout the city,” says 2nd Ward Ald. Bob Fioretti, who questions the public assistance to the plan.

“We believe in public-private partnerships. But is this the best use of public money in light of the problems we have in the city of Chicago? I think the answer is no,” Fioretti said.

The larger tourism project would include other upgrades and renovations at McCormick Place and Navy Pier, many of which have been announced already.

In addition to the new arena, a $250 million 500-room boutique hotel would be built on the same parcel of land, according to the mayor’s office. Private developers would build and own the hotel. New restaurants and entertainment venues would also be built in the surrounding neighborhood.

Officials had previously announced a separate announced 1,200-room, $400 million “headquarters hotel,” along South Michigan Avenue near Cermak Road. That hotel would be owned by the MPEA, and funded by selling bonds, according to Reilly.

“The big hotel, which we will own, will be revenue financed. So it’s coming from whatever lenders or bond-holders buy the bonds. So that $400 million is, in a sense, private investment, even though we’ll own it,” Reilly said.

It would be run by a private hotel corporation, similar to the existing Hyatt Regency McCormick Place hotel, which is owned by MPEA but operated by Hyatt. MPEA pays Hyatt a monthly fee from public sources.

The hotels and restaurants are aimed at bringing in even more trade shows and conventions to McCormick Place.

“The only thing holding McCormick Place back at all is the lack of hotel rooms in the area,” Reilly said. “If you’re going to have hotel rooms, you need things for people to do at night.”

He said the convention center itself is “beautiful,” but the two blocks just north of it “are kind of dismal. I mean, there’s nothing to do here.”

A new CTA Green Line station would also be built near McCormick Place, just east of State Street, between Cermak and 23rd Street.

At Navy Pier, the Chicago Children’s Museum would be expanded; the east end of the pier would be redesigned with new bars and restaurants and an East End Park; the Gateway Park at the west entrance would get an interactive fountain that could be transformed into an ice rink in winter; and changes would be made to the South Dock, South Arcade, Pier Park, and Crystal Garden.

The projects have been timed to coincide with Navy Pier’s 100th anniversary in 2016.

Marilynn Gardner, president and CEO of Navy Pier, said, “It’s truly a landmark opportunity. We have to a chance to transform the Pier into an even more world class destination.”

The project could create thousands of construction jobs, but some neighbors who live near Navy Pier at the Lake Point Tower high rise, worry about the noise, the dust and the construction traffic.

Len Stark told CBS 2: “Obviously, my concern is with the noise, traffic, you know. We have only one way of getting to this place.”

Is it worth it for resident Eric Cunningham?

He says, “I’m really torn on it. I do think it’s good for the city that they bring in more tourists, but as a resident down here, it makes it pretty tough sometimes.”

Construction could start this fall.

In addition, the Lakefront bike and jogging path between the Chicago River and Oak Street would get a $48 million overhaul, in an effort to eliminate congestion and protect bicycles from collisions with cars.

Known as the Navy Pier Flyover, an elevated bike path would be built along the stretch where the existing path runs along Lower Lake Shore Drive, where the path is often congested with crowds of bicyclists and pedestrians on a sidewalk right next to the Drive.

Phasing exhibit of the planned Navy Pier Flyover (Source: City of Chicago)

Phasing exhibit of the planned Navy Pier Flyover (Source: City of Chicago)

The mayor’s office said the entire project would create 10,000 construction jobs, and 3,700 permanent jobs in the city.

In total, the projects will bring $1.1 billion in renovations and upgrades to McCormick Place and Navy Pier, according to the mayor’s office.

–CBS 2 Political Producer Ed Marshall contributed to this report.