Norwich — A $26 million project to convert the historic former Hale Mill into a hotel could receive a property tax abatement under the city’s mill enhancement incentive program, with construction ready to start pending council approval in June, the owner and developer said.

The City Council will hold a public hearing at its 7:30 p.m. meeting June 6 on a proposed ordinance to provide a 15-year phase-in for property taxes on the planned improvements to be done on the former textile mill, with its granite exterior, located at 140 Yantic Road in the heart of the Yantic mill village.

Gabi Benhamo, owner and developer for Mill Development LLC of Woodside, N.Y., said the plan calls for an estimated $26 million renovation of the vacant mill into a 164-room boutique hotel with a restaurant, indoor pool, salon and 500-seat banquet hall. He said construction is ready to start — “We’ve already done some work” — as soon as the council votes on the abatement plan.

“We plan to bring in a good restaurant and hire a chef and then decide on a name (for the hotel),” Benhamo said.

The proposal calls for owner Mill Development LLC to pay full taxes on the existing assessed value of the property, which is $452,200, each year through the 15-year period.

The abatement would apply to only the value of improvements on the property, with the owner paying 25% of the assessed value of the improvements for the first five years; 50% the second five years, and 75% during the final five years of the abatement period.

The developer also plans to apply for federal historic rehabilitation tax credits, which would require the mill to remain income-producing for a minimum of five years, according to the proposed tax abatement ordinance.

Mayor Peter Nystrom said that, unlike some property tax abatement plans, which begin with completion of construction, the Hale Mill plan would start with the “issuance of the first building permit for new construction.” That would give the developer incentive to finish the project quicker to receive the higher value tax breaks, Nystrom said.

The proposed ordinance also has a mandated start date of Dec. 31, 2022, and a completion date by Dec. 31, 2025. Benhamo said construction is expected to take 18 months to two years.

Benhamo said city officials have been “very helpful” throughout the project approval and permitting processes, especially Mayor Nystrom and Planning Director Deanna Rhodes.

“The town is very helpful, and they tried to help us the best, and they are working with us,” Benhamo said. “And we’re looking forward to opening, to bring a new vibe to the town.”

Mill Development LLC purchased the property in June 2018 for $826,000, after a previous hotel conversion project fell into financial trouble after several years of fits and starts, finally losing the property to foreclosure.

Mill Development LLC received approval from the Commission on the City Plan for the new project in December 2018.

The proposed ordinance calls the Hale Mill “a focal structure of the Village of Yantic,” starting as the Williams Flannel Mills, and it was included in a 1992 study of the city's historic mills.

“The Council of the City of Norwich seeks to encourage stability of the city, encourage tourism, and improve the quality of life for the residents of Norwich through the adaptive reuse, rehabilitation, and preservation of the historic and architecturally important resources that reflect Norwich’s rich history,” the proposed ordinance states.

c.bessette@theday.com