Norwich — A $26 million project to convert the historic former Hale Mill into a hotel received a boost from the city Monday night, with unanimous support from the City Council for a 15-year phase-in of property taxes.

Following a public hearing at the start of Monday's meeting, the council approved an ordinance to provide a 15-year phase-in for property taxes on the planned improvements to be done on the granite mill in the heart of the Yantic former mill village.

The proposal calls for the owner, Mill Development LLC, to pay full taxes on the property at 140 Yantic Road, currently assessed at $452,200, each year throughout the 15-year period.

The abatement would apply to 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% of the value for the second five years, and 75% during the final five years of the abatement period.

Later in the meeting, the council unanimously approved a second-year spending plan for the city’s American Rescue Plan funding, which included a $400,000 grant for the hotel project “that will support the re-emerging tourism, travel and hospitality industry.” The council had not voted on the spending plan by The Day’s print deadline.

The project 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 tax abatement ordinance.

Gabi Benhamo, owner and developer for Mill Development LLC of Woodside, N.Y., who did not attend Monday's meeting, said in April 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 as soon as the council approves the funding.

The only speaker at the hearing was Norwich businessman Robert Bell, also a state legislative candidate. Bell said the abatement helps a developer who already is investing “millions of dollars” in the city.

The Commission on the City Plan also favored the project, saying it met the city Plan of Conservation and Development to “capitalize on historic assets.”

“A mill that languished for decades is now being brought to life,” Council President Pro Tempore Joseph DeLucia said.

Mayor Peter Nystrom called it “really, really great news” that another of the city’s long-vacant mills will be revitalized, comparing it to the ongoing renovation of the giant Ponemah Mill complex in Taftvlle.

Earlier, 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 tax abatement ordinance also has a mandated start date of Dec. 31 and a completion deadline of Dec. 31, 2025. Benhamo said construction is expected to take 18 months to two years.

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, leading to foreclosure. The new owner received approval from the Commission on the City Plan for the new project in December 2018.

The ordinance calls the Hale Mill “a focal structure of the Village of Yantic,” starting as the Williams Flannel Mills, and designated as a historic mill in the city’s 1992 study of 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