After 40 years of contention, New Haven will demolish part of the Route 34 East Connector to build a boulevard and shops.

At a press conference Monday, Mayor John DeStefano Jr. unveiled a city project that would reconnect streets and develop businesses along the route in the Oak Street area of the city. The plans include demolishing part of the connector, replacing it with a boulevard, and using the freed 10 acres of land from the project to house businesses. But the project’s expected cost, and its extended time frame, threaten to further strain the city’s budget at a time when the Elm City is struggling for funds.

According to New Haven city records, the state of Connecticut acquired 26 acres of land in the late 1960s to connect downtown New Haven to its valley communities through an extension of Route 34. The project displaced 600 families in the process. At the time, the project was billed as creating jobs and improving the city by destroying the Oak Street area — a “slum neighborhood,” as contemporary advertisements for the project called it — in favor of “high-income apartments and department stores.”

By razing the Oak Street area, the state claimed it would better connect downtown New Haven and the Yale-New Haven Medical Center, which were on opposite sides of the neighborhood.

DeStefano said he hopes that this time the new project will better connect downtown New Haven to Union Station and the medical school campus while creating more than 5,500 construction jobs and 2,000 permanent jobs. The plan allows the Yale medical school campus — which includes both Yale-New Haven Hospital and the Yale School of Medicine — to expand into the area south of the highway.

Developer Carter Winstanley will, as part of the Downtown Crossing project, erect a new building between North and South Frontage Roads. The building, which will feature office and laboratory space, will mark the beginning of DeStefano’s 15-year Downtown Crossing project, meant to rebuild more than 18 acres of land in the area, the mayor has said. The city has yet to turn the land for the building over to Winstanley, though city officials said they expect the deed to change hands before the end of the year.

At the press conference, DeStefano said Downtown Crossing, at a projected cost of $45 million for solely the medical school campus portion, would generate $100 million in sales, income and property taxes. The cost of the entire project, City Hall spokeswoman Jessica Mayorga said, is difficult to pin down in light of the long-term nature of the construction.

But city officials maintain that the project will, in fact, decrease the tax burden on residents by broadening the city’s tax base.

“By reconnecting the street grid, developing space for new businesses, labs, housing, restaurants, cultural attractions, parks and so much more,” DeStefano said in a statement, “we will be growing our tax base, reducing the tax burden on our residents and most importantly, creating thousands of new permanent jobs at all skill levels.”

Ward 6 Alderwoman Dolores Colon said the project will be the first attempt made by the city to bring a community back to the ward it fractured in the ’60s.

“I think that whole area needs life after dark,” she said of the Oak Street area. “After the hospital and Med School employees leave, it’s like a grave site.”

The city expects the Route 34 project to take 15 years to complete.