Hotel developer seeks tax break from Norwich

Norwich - The development firm that purchased the defunct hotel project off Interstate 395's Exit 80 is asking the city for a 20-year property tax break in which the city would turn over $140,000 per year - most of what the project would pay in taxes - to fund a financial gap in the project costs caused by extensive vandalism done to the building and the current depressed hotel market.

Later Monday, in the final meeting of the current City Council, the aldermen voted unanimously but with expressed reservations on a resolution to ask City Manager Alan Bergren, city financial and legal officials to study the requested Tax Increment Financing proposal and to report findings and recommendations to the new City Council at its Dec. 16 first meeting.

Raleigh, N.C.-based Winston Hospitality Inc. completed a two-year complex foreclosure against former owner PRA at Norwich LLC and numerous other lien holders in May for what had been a nearly completed hotel building at 154 Salem Turnpike.

Winston Chief Executive Officer Robert W. Winston III told the City Council Monday that those two years wreaked havoc on the project, as vandals and metal thieves stripped the vacant building of much of its piping and wiring as the hotel market also declined in value.

The result left the hotel management company short on finances for the proposed $12.7 million project to rejuvenate the building into a 113-room Hampton Inn. Winston asked the City Council to contribute a large portion of future property taxes to cover the 9 percent project financial gap.

In a pie chart shown during his presentation, Winston said the developer would pay 43 percent of the project cost through its equity. Another 43 percent would come from a commercial construction loan, 2 percent each from a state Department of Economic and Community Development loan and a state sales tax exemption and 1 percent from a DECD grant.

Winston and Jay Davies, the company managing director, said even after turning over $140,000 per year in property taxes back to the project, the city still would receive an estimated range of $25,000 to $50,000 in real estate and personal property taxes from the project through 2033.

If the tax financing proposal is not granted and the project does not go forward, the city could expect to receive a peak of $75,000 now, dropping to an estimated $25,000 a year for the next 20 years.

Winston and Davies also said contractors and subcontractors already have been lined up for the project, bringing an estimated 250 construction jobs. Winston said 15 of the subcontractors are from the local area, within 30 miles of Norwich.

The completed hotel would employ 34 full-time employees, with Winston having a goal of filling 50 percent of those jobs locally.

During the council discussion, Alderman Charles Jaskiewicz said the resolution would "begin a dialogue" on whether Tax Increment Financing is practical and beneficial for the city, without endorsing the concept outright.

"I don't think the project as proposed is the world's greatest deal for the city," Alderman Mark Bettencourt said, but he agreed the city should explore it.

Alderwoman Sofee Noblick said throughout the recent fall election campaign, voters stressed the need for economic development. She said the city is obligated to look into the project request, while Alderman H. Tucker Braddock, who is retiring from the council, said city officials and the new council has many questions to ask - including the state's commitment to the project and the developer's plans in a similar defunct hotel project in Wallingford.

"We need to get some good answers back from the DECD," Braddock said.


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