Preston - The town has reached a critical point on the cleanup of the former Norwich Hospital property and must now decide whether to approve a proposed $8 million borrowing package, reject the funding and continue slowly or stop all work and pay for security and maintenance.

Residents will discuss the $8 million borrowing package Thursday at a town meeting and will vote on the proposal at a Nov. 27 referendum.

The proposal includes accepting a low-cost $4 million loan from the state Department of Economic and Community Development and matching it with $4 million in town bonding. If approved, the local match also would be used to obtain a $964,000 federal Economic Development Administration grant. Combined, the town would have nearly $9 million for environmental cleanup and demolition of the hospital property.

The state loan has a 1.5 percent interest rate, with a five-year deferral. For every 100 permanent jobs created on the property with future development, $1 million of the loan would be forgiven. For the $4 million town bond, town officials are considering 20-year loan periods, either taxable or tax-free loans, depending on rates and terms at the time of bonding.

During the first of four planned public informational sessions on the loan package Tuesday, Preston Redevelopment Agency Chairman Sean Nugent told about 20 residents that the agency has received $4 million in state and federal grants to date and added $300,000 in town matching funds. That money, nearly spent, has been used to clean and demolish 22 buildings and portions of the extensive tunnel network that crisscrosses the main 190-acre campus.

Most of those grants came in small $200,000 increments that took care of smaller buildings at the property - 38 percent of the buildings and 17 percent of the total square footage. Now, the agency is faced with major demolition costs to tackle the largest buildings on campus, including the large Kettle and Lodge buildings.

Nugent said early estimates when the town first took ownership of the property put the cleanup cost at $38 million to $40 million. Nugent said those proved to be inflated figures, and the agency has estimated the entire cost to be about $18 million to $20 million.

If the town approves the $8 million package, all but about five to 10 buildings could be demolished, including the Kettle and Lodge buildings. With anticipated environmental contamination, the Kettle Building alone is expected to cost $2 million to clean, with actual demolition at no cost because of scrap value.

Nugent said he could not promise, but believes cleaning the property would put the town in a better position to attract future developers. Those efforts have been unsuccessful to date, with only two "interested" parties considering parcels at this time.

If the town rejects the loan package, the PRA either could continue attempting to obtain relatively small grants - with some future town matches likely needed - and clean small portions of the property.

The town could shut down the entire operation, still needing to pay an estimated $165,000 per year, or at least 0.35 mills, for security, maintenance and some legal fees. An 8-foot security fenced would cost an estimated $460,000, officials said.

Residents asked numerous technical questions about the proposals, also expressing disappointment that so few residents attended the session.

Nugent explained that the PRA is not allowed to pay for advertising or promote the informational sessions. Nugent said residents paid for some fliers and posters, and Nugent urged residents to spread the word about the three additional meetings scheduled.

First Selectman Robert Congdon said the slide presentation on the progress of demolition, grant funding and proposed development plans has been reviewed by town attorneys and the state Elections Enforcement Commission for content.

The presentation is available at the agency's website, www.prestonriverwalk.com and hard copies are available at Town Hall.

c.bessette@theday.com

Preston Redevelopment Agency informational meetings on proposed $8 million borrowing package for continued cleanup of the former Norwich Hospital property:

• Thursday: 6 p.m. Preston Veterans' Memorial School prior to 7:30 p.m. town meeting discussion on the loan package.

• Saturday, Nov. 17, 10 a.m., Town Hall.

• Tuesday, Nov. 20, 7 p.m., Preston Veterans' Memorial School.