EL PASO — At a special City Council meeting in 2006, a billionaire real estate investor unveiled his vision for redeveloping downtown El Paso. To replace tenements and boarded-up buildings, he proposed restaurants, shops and an arts walk rivaling San Antonio’s River Walk.

Representative Beto O’Rourke, one of hundreds attending, wasn’t exactly a disinterested party.

Not only had he married the investor’s daughter, but as a member of City Council, he represented the targeted area, including a historic Mexican-American neighborhood.

Calling downtown “one piece of El Paso that was missing on the road back to greatness,” Mr. O’Rourke, now a congressman and the Democratic candidate for Senate in Texas, voted to take the first step forward with the plan.

Over the next two years, Mr. O’Rourke would defend the plan before angry barrio residents and vote to advance it. At other times, he would abstain. Business owners who opposed the plan accused Mr. O’Rourke of a conflict, citing the involvement of his father-in-law, the billionaire developer William D. Sanders.

Twelve years later, Mr. O’Rourke is championing progressive causes, attracting millions of dollars from small donors across the country and eschewing political action committee money in what he calls a grass-roots effort to unseat Ted Cruz, the Republican incumbent, in one of the most closely watched Senate races in the midterms. Polls show Mr. Cruz with a modest lead.

Yet, as Mr. O’Rourke’s national popularity grows — there is even speculation that he may run for president in two years — his involvement in the proposed El Paso redevelopment highlights a side of his record that, on its surface, seems to contradict the populist image he has cultivated in Texas and nationally.

Mr. O’Rourke was perceived by many as siding with the moneyed elite against angry barrio residents, small business owners and even the Jesuit priests who ministered to the immigrant community at Sacred Heart Church.

“Mr. O’Rourke was basically the pretty face of this very ugly plan against our most vulnerable neighborhoods,” said David Dorado Romo, a local historian who added that the episode had resurrected longstanding race and class divisions in the city.

Barrio residents feared that they would lose their homes through eminent domain, and a city-funded branding study suggested that the residents of El Paso were perceived as “dirty” and “lazy.’’ Among some constituents, the hurt feelings have lingered.

ImageGuadalupe Ochoa outside of the El Paso home she has lived in since 1973. She was one of the residents who felt Mr. O’Rourke had turned his back on the community.CreditIvan Pierre Aguirre for The New York Times

One of them is Guadalupe Ochoa, 75, who owns a home near the redevelopment area. “We had voted for Mr. Beto, and now that he got to the top, and close to the power, he turned things around on us,” Ms. Ochoa said through an interpreter, Dr. Romo.

Mr. Cruz and the super PAC that supports him have seized on that chapter of Mr. O’Rourke’s career to attack him as elitist, accusing him in ads of “displacing poor families to enrich his own,” something that never happened — the plan itself was ultimately abandoned.

Mr. O’Rourke declined requests to be interviewed for this article. In response to claims that he favored developers over barrio residents, he has said in the past that he never voted for eminent domain, that no property was ever taken by the city through eminent domain and that he had no financial interest in the project.

Despite the resentment among some over the development plan, Mr. O’Rourke has broad support in his home city, where 80 percent of the residents are Hispanic but still regard Mr. O’Rourke, who is white, as a favorite son. “Beto” signs, T-shirts and lapel buttons are everywhere. Even many who objected to Mr. O’Rourke’s support for the redevelopment plan say they will vote for him.

Once a bustling city with 50,000 manufacturing jobs — and nicknamed the jeans capital of the world for its thriving garment industry — El Paso was hit hard by the North American Free Trade Agreement. As jobs moved to Mexico in the 1990s, the city’s strong retail trade also declined.

Mr. O’Rourke’s father-in-law, Mr. Sanders, now 77, had grown up in El Paso, attended Cornell, then started the national real estate company LaSalle Partners, headquartered in Chicago. The firm later merged with another to form Jones Lang LaSalle.

Bloomberg News once called Mr. Sanders the Warren Buffett of the real estate industry and estimated the value of his portfolio at $20 billion. He developed expertise in establishing real estate investment trusts, which pool money from investors to buy and operate real estate developments.

“When I spoke to kids in El Paso, I would tell them that someday you can become Bill Sanders,” said Tanny Berg, an El Paso businessman.

In ruby red Texas, a Democrat hasn’t been elected to a statewide position since 1994. But ahead of this year’s midterm election, a Senate race between an unflinching liberal and a religious conservative is unexpectedly close.Published OnOct. 12, 2018CreditCreditIllustration by Drew Jordan

By the early 2000s, Mr. Sanders had returned to the El Paso area, where he was asked to help redevelop the downtown.

The vehicle for the renewal was the Paso del Norte Group, a nonprofit organization. Made up of more than 300 leaders from both El Paso and Ciudad Juárez, across the river in Mexico, the invitation-only organization received both city funding and a federal grant to devise its plan.

For a time, its membership included Mr. O’Rourke as well as Amy Sanders, Mr. Sanders’s daughter, who had married Mr. O’Rourke in September 2005, just months before the plan was made public.

Mr. Sanders unveiled the proposal, focusing on a 300-acre swath of downtown, in a meeting in March 2006. What might not have been entirely clear to everyone at the meeting was that the plan’s success was largely dependent on the city’s ability to persuade property owners in the most blighted areas to turn over their holdings to the private trust. In the case of recalcitrant owners, eminent domain would be used.

“We don’t want to do that, O.K.?” Mr. Sanders told the gathering, saying the first option was to persuade owners to fold their properties into the trust.

The plan immediately caused controversy.

Much of it involved the proposed demolition of portions of Segundo Barrio, which means Second Ward, near the Rio Grande border crossing to Mexico. The neighborhood has served as the entry point to the United States for generations of Mexican-Americans.

The barrio retains much of its appeal despite efforts to “de-Mexicanize” it. In the early 1880s, many of the adobe buildings were torn down, removing what newspapers called “their bad associations,” an effort Dr. Romo described in his 2005 history, “Ringside Seat to a Revolution.”

ImageA mural of the Virgin of Guadalupe in the Segundo Barrio, El Paso, in 2016.CreditRussell Contreras/Associated Press

Street murals depict colorful scenes evoking Roman Catholicism and the Mexican immigrant experience. Retail strips cater to both the Mexican-American community in El Paso and day trippers who cross the bridge by foot from Mexico.

The plan aimed to relocate the residents of nearly 500 apartments, many of them in the barrio. Even though new housing was to be built, some residents worried they would not be able to find affordable housing.

Outrage in the barrio was heightened with the release in 2006 of a city image study, developed by an outside vendor, apparently intended to set the stage for the redevelopment. The study included head shots of the actors Penélope Cruz and Matthew McConaughey, interpreted by some as the theoretical new faces of El Paso, with notations like “educated” and “bilingual” and “30-40,” a reference to a desired age range.

The old face of El Paso, by contrast, was an older man wearing a cowboy hat along with the notations: “speak Spanish,” “dirty,” “lazy” and “uneducated.”

Barrio residents gave Mr. O’Rourke a piece of their mind in a meeting at Sacred Heart Church.

One of them was Ms. Ochoa. “We used to be happy here in our barrio,” she told him, “even with all its defects.”

“There are a lot of people who are working very hard to frighten the people who live here,” Mr. O’Rourke told the residents, speaking in Spanish, in an effort to reassure them that the results would not be so dire.

ImageA campaign sign for Mr. O’Rourke on the door of a bakery in Segundo Barrio.CreditIvan Pierre Aguirre for The New York Times

Mr. O’Rourke abstained from votes establishing a tax zone that would set the stage for eminent domain and voted for a temporary moratorium; he later voted against an effort to limit its use.

While the branding study inflamed opponents in the barrio, business owners with properties in the redevelopment zone formed an organization called Land Grab Opponents.

In an ethics complaint, they asserted that Mr. O’Rourke’s company, Stanton Street Technology Group, had provided information technology services to the Paso Del Norte Group.

They also questioned whether Mr. Sanders — and by extension Mr. O’Rourke — would be enriched by the plan. Though Mr. Sanders had said he would donate the dividends from his investment to a nonprofit organization, “his financial involvement only crystallizes the conflict of interest for Representative O’Rourke,” the complaint stated.

The city ethics commission rejected the complaint. Stuart Blaugrund, the Dallas lawyer who represented the Land Grab Opponents, said in an interview that Mr. O’Rourke was “tone-deaf” to the appearance of a conflict.

“He ultimately recused himself and did the right thing, but it seemed to me to be unnecessary for us to have to generate such ire among his constituents in the interim period,” Mr. Blaugrund said.

“Even if he didn’t have an actual conflict, the optics were terrible,” he added. According to Mr. Blaugrund, the plan was eventually abandoned, partly because of a state ballot initiative in 2009 prohibiting the use of eminent domain to take property for private use.

In an interview with The New York Times Magazine in 2011, Mr. Sanders said he had intended nothing nefarious in the plan, describing it as an effort to put together “a civic system here that weaves together the whole city.”

ImageDespite resentment over Mr. O’Rourke’s support of the redevelopment plan, many in El Paso say they will vote for him.CreditTamir Kalifa for The New York Times

Mr. Sanders was among investors in late 2006 who formed Borderplex Community Trust, a trust that was to spearhead the redevelopment by taking control of downtown property.

By February 2007 — before it became clear the plan would fall apart — Borderplex had started buying up major El Paso buildings. Recent documents showed Borderplex’s assets at $82 million, including two major office towers in downtown El Paso, with Mr. Sanders owning 1.7 percent.

“Did he contribute the profits to charity as he pledged?” Mr. Blaugrund wondered.

Mr. Sanders did not respond to requests to be interviewed.

Six years after the redevelopment plan was proposed, Mr. Sanders appeared to step in to help his son-in-law’s first race for Congress. One of his companies contributed $37,500 to a PAC that, in turn, spent $240,000 to defeat Mr. O’Rourke’s opponent, the eight-term Democratic congressman Silvestre Reyes.

Mr. O’Rourke won by 3,000 votes.

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