Surety bond won't be answer for development at Norwich hotel site

Norwich - The city and the new owner of a defunct hotel project on Route 82 at Interstate 395's Exit 80 won't find a pot of available money in the site work surety bond given to the city by the previous developer who lost the hotel property to foreclosure.

The question of what happened to the required site work bond posted to the city in the event that erosion control and landscape work would not be done properly arose during a public hearing Wednesday on the new developer's request for city assistance in completing the project.

New owner Winston Hospitality Inc. has requested that $140,000 per year for 20 years in future real estate tax revenue be committed to paying off a project construction bond to complete the hotel renovation. The nearly completed building has sat vacant for two years and has been ransacked by vandals and metal thieves.

Peter Davis, Norwich director of planning and development, said the previous developer, PRA at Norwich LLC, posted a $152,000 site work bond when the firm received city plan approvals for the initial project. While the city still has that bond, it is in the form of an insurance surety bond by Travelers Insurance and would not be accessible either by the city or the new owner to revive the hotel project.

"The city can only attempt to call the bond to complete site work that was itemized in original bond estimate," Davis said. "We have no option to use it for anything else which might be suggested if the developer walks, such as completion of the building and/or demolition, securing the site, etc."

Davis said even if the site had erosion or other problems that required an emergency response from the city, insurance surety bonds have proven to be difficult to access. Insurance companies often challenge the requested payment.

For that reason, the Norwich Commission on the City Plan has told developers over the past four years that it will not accept surety bonds for major site work projects, Davis said, although such a payment method is allowed by state law and in the city zoning regulations.

Instead, Norwich has required either a letter of credit or passbook from a bank, proving the developer has the money to cover potential site problems.

Davis said a passbook would give the city cash in hand, while a letter of credit is "the middle road" that still gives the city security on the project.

"We've had developers willing to give the letter of credit," he said.

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