New London―The City Council has approved a 20-year tax abatement for developers of an apartment complex that would make use of a long vacant plot of land at 174 Bank St.

The payment in lieu of taxes agreement, approved unanimously on Monday, is being provided to New York-based Vessel Technologies, a company that has pitched the idea of a state-of-the-art, energy efficient and partially prefabricated five-story building with up to 30 units in the heart of downtown.

The agreement provides an estimated 25.1% discount in tax payments to the city over 20 years.

Under the current tax rate, the estimated taxes over the 20 years on the $4.5 million project would be $2.09 million because it located within an Enterprise Zone.

With the tax agreement, however, Vessel will save about $525,000, paying a total of $1.56 million over 20 years.

Attorney William Sweeney, who represents Vessel, noted under questioning from Councilor John Satti that the empty lot where the building would be situated now generates just $5,500 a year in taxes, or $110,000 over 20 years.

The agreement, Sweeney said, provides the city “$1.5 million more than if we did nothing.”

Vessel purchased the site for $225,000 in February, and plans to start construction before the end of the year. The property is located next to the Salvation Army Family Store.

Under terms of the agreement, Vessel would pay a “fixed assessment agreement” spanning 20 years with tax payments starting at $5,440 in years one and two, $30,000 in year three, $55,000 in year four and $76,000 in year five. The $76,000 payment in year seven would increase by 2.5% per year every year after.

“It’s much more than the $1.5 million we’re going to pay the city over the next 20 years. It’s really about repopulating the downtown with people with disposable income (and) hopefully a lot of those empty storefronts get filled with those basic essential businesses that everybody is looking for downtown,” Sweeney said. “We need housing at all different socio-economic levels.”

While Vessel expects the Bank Street project to be its first in Connecticut, it has proposed similar developments in communities such as New Haven, Stratford, Rocky Hill and Glastonbury. It has completed a project in Trenton, N.J.

In New London, the building would be constructed on a slice of of land considered blighted and financially unfeasible to develop because of its small footprint and location in a flood plain. As a result, the building will be elevated and provide parking below.

The city’s Planning and Zoning Commission in January approved modifications to zoning regulations that allow a fully residential building in downtown, something that was not previously allowed. The original approval was for a 20-unit building but a later modification now allows for up to 30 bedrooms.

Vessel Technologies Executive Vice President Josh Levy said that because of the flexibility of its construction process, the mix of one- and two-bedroom apartments can be modified based on need without changing the footprint of the building.

Vessel’s construction system facilitates the development of “leftover” or “hard to develop” sites and speeds the construction process, Levy said.

Rents are expected to start at $1,400, which developers say is below market rate for new units and aimed at 18 to 34-year-olds with income levels at 80% of the area median income.

Levy said the project is in the permitting process and he hopes to see ground broken next month.

G.smith@theday.com