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Stalled open space negotiations filled with talk of affordable housing

East Lyme — What is the value of undeveloped land? And how much is it worth to keep it that way?

These are questions surrounding negotiations on roughly 114 acres tucked into the woods near Lake Pattagansett represented by businessman and former resident Stephen Harney. The aquifer-heavy swath of land has been the number one preservation priority for the town going back 20 years, with the Board of Selectmen in December authorizing First Selectmen Kevin Seery to enter into talks with Harney to purchase it as open space.

Harney this past week said there's been no progress in negotiations since then. So instead of thinking about the land solely as open space, he said it's time to consider finding a developer to address the "screaming need" for housing people can afford.

He said one interested developer so far produced a concept for a mix of 175 affordable and market-rate units that could include single-family homes, townhouses and a component for the 55-plus community. The state considers units affordable when, through subsidy or deed restrictions, residents of a household making 80% or less of the area median income don't spend more than 30% of their income on rent or mortgage payments.

"Development is the option if we don't come to terms with the town," Harney said.

Harney acknowledged the town commissioned an appraisal of the property to determine how much it's worth, but added Seery has not shared the document or the dollar figure with him. He said his guess is that the two sides are far apart on price.

Based on the East Lyme Land Trust's appraisal combined with his own analysis, Harney said he was looking at $2.3 million as a target.

Seery declined to share details because of the ongoing negotiations but confirmed there is "quite a bit of difference" between the two appraisals.

He said the town wants to purchase the property but he has a responsibility to ensure the town doesn't pay "significantly more than it's worth."

Land trust member Art Carlson this past week described the value of open space in terms of one of the site's most natural resources: water.

"Anybody who is interested in protecting the quality of the water, and quantity, doesn't want any building or roads upstream of the well," Carlson said.

The town's utilities engineer, Ben North, during a budgeting discussion last year said the aquifer is "pristine." He told officials that it produces about a 10th of the total yield from the town's six wells.

According to Harney, the property's value is determined by the amount "ready, willing and able" buyers agree to pay for it. He pointed to the 255-acre Deer Lake Scout Reservation in Killingworth, where media reports show a nonprofit conservation organization's offer of $2.4 million was countered with a $4.6 million offer from a private developer. A flurry of fundraising ensued as a local Scout group backed by conservationists worked to come up with a competitive offer just under the May 1 deadline.

Changing footprint

The plan for the town to purchase the former Hathaway land as open space was first pitched in the fall by the East Lyme Land Trust, which was under a since-expired contract to buy it for $1.65 million even as the volunteers searched for funding sources. The state Department of Energy and Environmental Protection last spring gave the land trust a $400,000 grant that officials say is transferable to the town.

Hathaway Farm LLC, a Delaware-based entity Harney said belongs to his wife and children, paid $1.05 million for the tract last June. The land was freed up after a court order forced the sale of the property, which legal documents show had been tied up for years in a family dispute. The land had been held in the same family since it was deeded by the King of England in the late 1600s.

The mortgage is held by Robert A. Blatt of Larchmont, N.Y., according to land records.

The property was listed at 152 acres, but Harney said a survey conducted after his purchase showed it's actually 138 acres. In April, he sold 9.9 acres to Elizabeth and Mark Lloyd, who own a cottage on 0.15 acre along Lake Pattagansett within the Hathaway property footprint.

Based on maps showing the boundary line adjustment, the original 3,649 feet of lake frontage along the southern edge of the property has been reduced by 845 feet due to the sale. The remaining frontage sits on the shallow, vegetation-laden northwest arm of the lake.

The maps show additional parcels within the 138 acres that are not part of the offer to the town. One is 6.72 acres on the northwest portion along Scott Road, which is currently listed by RE/MAX on the Bay for $807,770. Town Director of Planning Gary Goeschel this past week said no subdivision approvals have been issued for the parcel so far.

Another 3.2-acre carve-out sits along Lake Pattagansett next to the Lloyds' property, which would further erode the amount of lake frontage for the 114 acres being offered to the town.

Harney said he also was involved in the land trust's recent purchase of 301 acres on the border of East Lyme and Montville for $1.58 million that will be called the Nehantic Nature Preserve. He said he had no ownership interest in the property, which was sold by the South Carolina-based Duval Partners LLC, but he was compensated by the former owners as a consultant.

The land trust paid for the property using grants from the state's Open Space and Watershed Land Acquisition Grant Program, the Community Foundation of Eastern Connecticut and the Bafflin Foundation.

"We protected 300 acres in the north end of town without coming to the town for anything," Harney said.

In that sale as well, he said the owners carved out land with street frontage for 2-acre lots.

"Because in the world of developing, you monetize certain things," he said.

Harney also was involved in selling 166 acres of forestland at the headwaters of the Niantic River to a preservation organization in 2017 for $1.7 million. The deal included $350,000 from the town and a $500,000 state grant.

"I almost want to say I've spoiled the town and the administration, because they got 200 acres for $350,000 and they got 300 acres for nothing," Harney said.

He compared those collaborative deals to the acquisition of 301 acres surrounding Darrow Pond in 2011. That's when the town bought the foreclosed property from Webster Bank for $4.1 million.

"They didn't raise one single dollar other than putting it on the back of taxpayers and floating a 20-year bond," Harney said.

Seery said Harney provided the land trust's most recent appraisal but has refused to give him a copy of the original appraisal conducted in 2019 in conjunction with the land trust's grant application with DEEP.

Land trust President Ron Luich said the appraisal was updated after the survey determined the property was smaller than initially thought.

Seery expressed frustration with not having access to the 2019 appraisal. "You're asking the town to commit over a million dollars and we need to be able to answer to the town exactly what was involved in the previous transactions leading up to this, and why we're paying the money we are. They have a right to know that."

Harney told The Day he considers the first appraisal irrelevant but doesn't care if the town sees it.

"Somehow they think that because something wasn't offered to them that there's something up," he said. "There's nothing up here. This has always been — and will either live or die — as an opportunity. There's nothing up here. There's no smoke and mirrors."

Affordable housing

According to Harney, preserving the land as open space is the easiest course of action for him. But selling it to someone who will put in affordable housing could serve a societal need and generate more money — as long as there are enough units across which to spread construction costs.

"I just think you would have to have lived in a cave as a cloistered monk to not realize there's a screaming need for affordable housing, whether that's rental or ownership," he said.

Harney pointed to 8-30g, the affordable housing statute devised as an incentive to promote fair and diverse housing options in municipalities where less than 10% of the housing stock is considered affordable.

For towns below that threshold, 8-30g paves the way for construction of affordable units by giving developers the right to sue the town if their plans are rejected, and shifts the burden of proof to the municipality to show the risk to public health or safety outweighs the need for affordable housing.

Critics of the statute say developers use it to circumvent local zoning regulations that put restrictions on size and location of developments. Affordable housing proponents say those restrictions keep people out and drive up the price of housing.

Seery said New London-based attorney Paul Geraghty, who has been representing the land trust, and East Lyme developer Jeff Torrance met with town Zoning Official Bill Mulholland to discuss the topic of affordable housing on the site. Mulholland, when asked for details, said he could "neither confirm nor deny" the conversation.

Torrance and Robert A. Blatt — the one holding the mortgage on the property being offered to the town — are prohibited under the terms of a 2015 settlement agreement from purchasing property in East Lyme, filing land use applications or otherwise engaging in development "directly or indirectly, under any circumstances or conditions whatsoever."

The settlement with the town was the culmination of more than a decade of legal wrangling surrounding development of land in the area of Darrow Pond that began when New England National, the company operated by Torrance and Blatt, claimed in bankruptcy court that the town overvalued the assessment of its land. The town ultimately paid the company $650,000, while the company agreed to convey 8 acres of Darrow Pond to the town and release all of the easements it controlled on the town's Darrow Pond property.

Geraghty has represented New England National in litigation against the town.

Blatt and Torrance received zoning approval from the town in 1998 to build a golf course on Mostowy Road under the name New England National, according to news reports at the time. Previous plans for a golf course at the site had dissolved in legal and financial troubles.

In 2004, Virginia-based Darrow Pond LLC, financially backed by Virginia real estate developer L.M. Sandler & Sons, took ownership of the property. In 2006, Vespera Investments received approval from the town to build a 600-unit community for adults aged 55 and older, but those plans also fell through. Webster Bank then foreclosed on the property in 2008 from Sandler, which had taken over the property in 2007 after backing Vespera.

Torrance this week said he was in the zoning department to talk about unrelated topics regarding the Nehantic Nature Preserve. He denied any connection to the Hathaway Farm property. "I have nothing to do with that," he said.

Torrance said he's a volunteer with the land trust but does not act for it.

Luich, the land trust president, described Torrance as an adviser who knows the regulations and what must be done to comply with them. He said Torrance and Harney bring a wealth of knowledge to the organization.

"The amount of information they have purchasing and developing land is a landfall for us," Luich said.

Seery acknowledged the restrictions on Torrance being able to do business with the town. He said officials are researching the legalities.

Moving forward, Seery said his hope is to meet in person with Harney, the land trust and the attorneys.

"The town will definitely make an offer on this property, but I think rather than trading emails and phone calls, we need to sit down face to face and discuss this," he said.

Harney said he'd prefer to see fewer people involved in the discussions. "I don't think you need the land trust," he said. "They don't control the contract. They do control the grant, but there's really nothing they can do."

Luich, the land trust president, characterized Harney as one of the "benefactors" who put up money as a stopgap to prevent it from being purchased by an outside developer he said was watching the property. Now, he said Hathaway Farm LLC is "holding it for us" until the town steps in.

He declined to name any of the other people involved in the purchase.

Harney, for his part, said benefactor is not the right word for his role in the deal. He called himself a "conservation intermediary" who was able to borrow money and close quickly on the purchase.

The intent remains to preserve the land as open space, according to Harney. But he said there's nothing contractually obligating him to do that.

"If they don't do it, I'm not going to cry," he said. "We could probably make more money working this thing and selling it to a developer."

e.regan@theday.com

Editor's Note: This version corrects the name of the town's utilities engineer, Ben North.

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