New London - The developer who wants to build a grocery store and 43 units of housing on Bank Street is working to obtain financing for the $11.4 million project while facing several obstacles, including possible soil contamination and inadequate parking on the site.

Kyle Klewin, a partner in Klewin Development of Groton, was granted an eight-month extension Monday night of his "preferred developer status" for the city-owned lot at the corner of Bank and Howard streets.

Klewin is proposing a 19,000-square-foot grocery store and three floors of apartments. The one and two-bedroom units would be 80 percent market rate and 20 percent affordable. The residential portion also would include a gymnasium and office and meeting spaces.

The company has applied for $250,000 loan from the state Department of Economic and Community Development for pre-development costs, and will apply for $5 million from DECD to go toward the housing. The company would also seek a $6 million bank loan and $400,000 from the Community Development Block Grant program.

Klewin is partnering with Sheldon Oak Central and the Women's Development Corp. The pre-development loan from the DECD, if it is approved, would be used to fund design engineering, environmental review, cost estimates, financial analysis, legal and financing fees.

Plans include a 67-space parking lot for residents and shoppers. When questioned about the need for more parking by the council, Ned Hammond, the city's economic development coordinator, said all those details will have to be worked out in an agreement. The city's planning department also suggested parking on Bank Street be angled, which would create another 20 or so spaces for public parking. And there is possible parking with the abutting property owner, Hammond said.

The City Council unanimously approved the extension, but Councilor Adam Sprecace said the extension is not an endorsement of the project. Klewin will have to negotiate a development agreement, which would have to be approved by the City Council.

Hammond said the agreement would include a purchase price, possible remediation work and details about the construction. The latest assessment on about 2.5 acres of the site is $675,000, he said. Possible environmental contamination must be further studied, he said, and a high water table has to be addressed during the design of the building.

"Klewin is at the point, they want to get it out and let people know what's going on," Hammond said, adding he's been talking to Klewin for about three years about developing the site. "At this point, we're a lot more excited about the possibility of this taking place."

Klewin, who made a presentation to the council, said the project will create jobs and tax revenue. The grocery store, which he declined to name because he is still in negotiations with a business that has two similar stores in New London County, would employ about 34 full-time and 13 part-time workers. The housing aspect would require five-full time positions, and construction, which could begin at the end of 2014, would employ around 55 workers.

"It will create positive momentum in the city to spark further development," Klewin said.

The site, which is known as Parcel J, has been vacant for decades, ever since the New London Redevelopment Agency bought the land in 1972 as part of a citywide Urban Renewal Plan. The redevelopment agency has since been disbanded and the City Council is in charge of the property.

k.edgecomb@theday.com