NIAGARA FALLS — The city will chip in $650,000 of its casino revenue toward a project to renovate a high-rise hotel on the Niagara River.

Directors of the city’s NFC Development Corp. on Monday unanimously approved a $650,000 grant for a project by hotelier Faisal Merani to reopen the former Inn on the River at 7001 Buffalo Ave. as a hotel with a triple diamond rating.

Merani’s company, LaSalle Hospitality, plans to spend at least $7.1 million, including the grant and other financing, on buying and upgrading the property.

“It’s a beautiful piece of property,” said Damon DeCastro, an attorney for Merani. “It’s one of the first things you see when you come across the Grand Island Bridge.”

The eight-story hotel, which was also formerly known as the Red Jacket, was condemned last year after it was damaged by fire.

LaSalle Hospitality closed on a deal to purchase the hotel in September.

DeCastro said the hotel had “great potential” but the project was not feasible without the city’s help. The Niagara County Industrial Development Agency has already granted a 15-year reduced property tax plan for the hotel.

“Because of the recession, banks aren’t lending in the hospitality field. Because of the condition of the hospitality industry in Niagara Falls, we need a boost,” DeCastro told NFC Development board members. “Having another closed hotel does not benefit anyone.”

Merani, whose family owns the Holiday Inn on Buffalo Avenue, is also vice president of Sterling Inn and Spa in Niagara Falls, Ont. He is also working on a project to reopen the former Fallside Hotel and Conference Center on Buffalo Avenue.

The grant is tied to a $6 million minimum investment and the creation of 45 full-time jobs. LaSalle Hospitality could be required to repay the grant unless the hotel is open and operating for at least three years, according to a summary of the grant conditions.

The grant also requires the property to be fully operational by Dec. 31, 2011, according to the summary.

The grant will come from a portion of the city’s casino revenues that city officials last month transferred to NFC Development for the creation of a new fund designated specifically for incentives for “major hotel projects.” The $650,000 is all of the money city officials set aside in that fund.

Mayor Paul A. Dyster said that the proposal underwent a “very thorough vetting” by the city’s Economic Development Department and that getting additional hotel rooms online as quickly as possible was one of the “highest economic objectives” of his administration.