A proposal for a 32-story tower to be erected in downtown New Haven will be downsized to 300 feet, the developer and city officials announced Thursday.

Developer Becker + Becker and the city have agreed on an initial set of terms for the redevelopment of the Shartenberg site — a vacant 1.5-acre lot on the corner of State and Chapel streets — and unveiled an updated version of their design at a press conference. Under the revised plans, the project will feature a residential tower of just 300 feet, which would make it the third tallest building in the city after the Connecticut Financial Plaza and the Knights of Columbus tower.

The tower will offer mixed-use retail and a grocery store, in addition to market rate and affordable housing, developer Bruce Becker said.

New Haven Mayor John DeStefano Jr. said the dense residential housing planned for the Shartenberg site will help to forge a link between the New Haven Green and areas further east on Chapel Street, such as Wooster Square Park. He said the climbing rents in New Haven during the last few years make dense residential developments feasible, and that the project will raise an estimated $1.5 million in annual taxes for the city once the project is completed.

“Pulling [in] Wooster Square is a vital part of the project,” DeStefano said. “Tall buildings equals tall taxes.”

Since the initial plans for a 32-story tower were unveiled in February, some community members have expressed concern that the tower would not fit in well with the surrounding five-story buildings. In response to those worries, Becker said, there will be a base on Chapel Street at least 45 feet high, while the tower will be perched on top of the base, further from the streetscape.

The design also includes a smaller tower at the corner of Chapel and Orange streets that would be used for office space.

The Shartenberg site is well suited to dense residential housing because of its proximity to the State Street Railway Station, which has Shoreline East commuter train services, Becker said.

“It is important in terms of regional planning,” he said. “[Dense buildings] need to be located where there is a density of transit locations.”

DeStefano said there are currently very few vacancies in existing housing units downtown and a high demand for new units in the district, so a large increase in the housing supply would not upset the market.

Ward 7 Alderwoman Frances Clark said the arrival of a grocery store at the edge of the Ninth Square will come as a great relief to members of her ward, who have sought one for many years.

Greater New Haven Chamber of Commerce President Tony Rescigno said the significant addition to the downtown population will increase foot traffic and encourage retail development in the neighborhood, which will create more jobs and cause the downtown economy to expand.

“More retail means more jobs, and more jobs means more wealth,” he said.

Becker said he is very pleased with the rate of progress of the project so far and is looking forward to moving onto to the next stage of detailed planning. He said his firm is preparing to hold a community design workshop to receive public input on the design. The meeting is scheduled for April 24 at 200 Orange St., he said.

City officials said the Board of Aldermen is expected to begin its consideration of the Shartenberg proposal in June 2007. Becker said he hopes he will be able to begin work on the site in the early months of 2008.