Preston — A key breakthrough has been reached among town, state and Mohegan tribal leaders that could mean bulldozers can start rolling again by the end of November in the final cleanup of the former Norwich Hospital property.

The Preston Redevelopment Agency on Tuesday approved a term sheet that outlines the complex contractual agreement between the state Department of Economic and Community Development, the town of Preston and the Mohegan tribe, which will take over ownership of the property for a major redevelopment once the cleanup is completed.

The agreement must be approved by the Board of Selectmen, which will vote on it Thursday. That move would launch a final Financial Assistance Proposal, which all parties also must approve, along with a town meeting vote to accept a $7 million state grant for the cleanup. PRA Chairman Sean Nugent explained the agreements to the agency Tuesday.

The town previously had secured a $2 million loan toward the cleanup, bringing the final funding to $9 million.

The agreement clears up issues surrounding the cleanup, as well as how to pay for it, Nugent said.

Another problem had been that the cleanup deviates from state norms in that the tribe could not propose a final development plan until it owns the property, but the state normally requires a final development plan before approving a cleanup process. Instead, the parties agreed that the town would spend the first $5 million of cleanup funds, and the remaining $4 million, including the town loan if needed, will be placed in escrow to be used after the property is transferred to the tribe and specific development proposed.

With all the pieces nearly in place, Nugent said the PRA could secure town permits for the final cleanup and use the less than $1 million in previous state grant money to restart the cleanup late this fall.

Nugent praised state Sen. Cathy Osten, D-Sprague, for her continuous support of the project and for assisting over the past two years to clear up logjams in the process.

“Senator Osten,” Nugent said to Osten, who attended Tuesday’s PRA meeting, “we cannot do enough to thank you. We would not be here today without you. You have been extremely supportive of this project from the beginning. ... You were the voice that moved this thing forward from the beginning.”

Osten in turn praised the town for its perseverance over the past 20 years since the Norwich Hospital closed and the property was marketed for development. She said she was “so excited” the final obstacles have been cleared. “I just want to thank you guys for sticking to this. I think this is going to be a major regional asset. It’s good for Mohegan, but more importantly, it’s good for jobs in this region. It’s good for the entire region.”

At issue since the spring of 2019 has been the discovery of extensive and previously undocumented coal ash contamination throughout what had been the main Norwich Hospital campus, Nugent said. The town’s environmental engineers had discovered ash beneath roadways, sidewalks and parking lots, in parts several feet thick.

The new agreement allows the town to expand a so-called consolidation area, where contaminated soil will be stored and capped. Limited types of future development would be allowed on those areas, such as boardwalks or parking lots, Nugent said.

The town received state approval for the $7 million state bond grant in the summer of 2020, but disputes arose over how to do the final cleanup and whether a $2 million loan the town had secured prior to the discovery of the ash contamination would need to be used up before the state grant.

The COVID-19 pandemic slowed negotiations as well, he said.

With all the delays, the town and tribe also must revise the property disposition and development agreement, which governs the future transfer of the property to the tribe. Deadlines listed in the agreement “have been blown away,” Nugent said. A town meeting will be required to approve any changes to the agreement once they have been negotiated, he said.

The town’s portion of the final cleanup is expected to take 12 months and would need to be certified by the state Department of Energy and Environmental Protection, which could take another six months.

Osten was optimistic Tuesday. “For 20 years, you guys have stuck with a vision, and I think we’re there,” she told the PRA. “I think in two years, we’re going to see construction.”

c.bessette@theday.com