The former Norwich State Hospital site as is seen from the air in this undated handout photo. Photo courtesy of the town of Preston
Once it was billed as the future home of Utopia, a $1.6 billion film studio and theme park that would attract 10 million visitors a year and put the rural town of Preston on the map as a tourist destination rivaling Disney World.
After the plans for the former Norwich State Hospital property collapsed in 2006 amid finger pointing and missed deadlines by the potential developer, the town regrouped and took on the responsibility for cleaning up contaminated portions of the site. Now, Preston is counting on the Mohegan tribe as the potential savior for the 390-acre site, perched on a bluff overlooking the Thames River opposite the tribe’s Uncasville casino.
Nearly four years since the town agreed to sell the property – and 24 years since the mental hospital closed – the Mohegans’ acquisition remains on hold pending state officials’ release of $7 million for remaining environmental cleanup.
“Once the money is put in escrow, we’ll step in,” said Chuck Bunnell, chief of staff for the Mohegans. “We’ve been doing a lot more work on our side, but this is not the time in which to release those plans. We’re very excited about it and it’s going to be phenomenal.”
At a 2017 press conference, the Mohegans unveiled eye-catching conceptual plans for a $600 million development including a theme park, synthetic ski area, luxury camping resort, timeshare condos and commercial development such as hotels and big-box retail.
One Developer or Many?
The tribe’s interest was piqued in 2015 when the town’s redevelopment agency hired The Counselors of Real Estate to send a team for a week-long visit and feasibility study, including meetings with Mohegan leaders. In a report, the real estate group mentioned potential uses including senior housing, medical offices, retail, flex-tech space and hotels. But in the short term, transitional uses such as an “upscale RV park,” hydroponic agriculture and bio mass energy generation could create some jobs and tax revenues, they said.
At the same time, the consultants cautioned that selling the entire property to a single developer carried risks.
“Current economic conditions make a master developer for the entire site unlikely,” the Counselors of Real Estate report stated, adding that selling parcels to 10 developers investing $5 million apiece was more likely to be successful than a single one overseeing a larger project.
“The perception was there may not anybody big enough to [acquire] everything, and so you should think about selling off the smaller pieces,” said Bill Norton, president of Manchester, New Hampshire-based Norton Asset Management, who chaired the study group. “The town was keen to cut a deal and say, `Look: you have to take everything.’ In real estate, is the sum of the parts greater than the whole? That’s always the analysis.”
Tony Sheridan, CEO of the Eastern Connecticut Chamber of Commerce, said the Mohegans’ role would be a boon to the potential development.
“It would be an enormous addition, especially to the tourism economy, and it’s a wonderful piece of property,” Sheridan said. “There’s not much left like it, and it would be a big plus for the region. Everything they do is first-class.
Cleanup Costs Scared Away Many
Preston voters approved plans for the Utopia resort at a 2006 referendum. But town selectmen terminated the agreement with Long Island developer Joseph Gentile, a Long Island businessman who boasted of his real estate background working for the late Fred Trump, after missing the deadline to submit a $56 million deposit.
Sean Nugent, chairman of the Preston Redevelopment Agency, said it was clear that the town would need to foot the cleanup bill to attract future developers. In 2011, the agency hired commercial brokerage JLL to market the property, but response was minimal, Nugent said.
“There was very little interest expressed. People saw the large price ticket to clean up the property,” he said.
That influenced the redevelopment agency’s strategy of seeking state and federal grants for demolition of nearly all 55 vacant buildings on the site, which had deteriorated in the previous two decades, and environmental cleanup costs such as removal of buried ash cinders from the hospital’s coal plants.
Since its formation in 2009, the volunteer redevelopment agency has spent $21 million on demolition and cleanup, all but $2.5 million coming from state and federal grants, Nugent said. The remaining $7 million is needed for a “worst-case scenario” of work needed to clean up the property to standards suitable for commercial and residential development, and would be placed in escrow for use by the Mohegans after they complete the purchase, he said.
COVID Puts Key Bonds in Doubt
Under the terms of the development and disposition agreement, the Mohegans would be allowed to keep the cleanup funding if the development totals $600 million, but refund a portion if the project is smaller-scale.
But recent downturns in projected tax revenues limit the state’s ability to issue bonds for new projects. Connecticut is currently at 99 percent of its debt limit, as set by state law, according to a July 1 report by state Treasurer Shawn Wooden, limiting its ability to borrow unless it revokes previously-authorized funding.
Local officials are keeping an eye on the agenda for the next meeting of the state Bond Commission, scheduled for July 31, to see whether their cleanup funding will be up for a vote. A spokesman for Gov. Ned Lamont, who chairs the commission and clashed with the Mohegan and Mashantucket tribes over their decision to reopen the eastern Connecticut casinos on June 1 during the COVID-19 pandemic, did not respond to a request for comment.
The Mohegans also are partnering with the Mashantucket Pequot tribe on plans for a $300 million casino in East Windsor, designed to protect the Connecticut gambling industry from the two-year-old MGM Springfield. In February, a Mashantucket leader told legislators groundbreaking on that project was three to five months away.
A former state legislator questioned the willingness of the Mohegan tribe to take on another real estate venture in the current economic climate.
“This is not exactly a golden age for the casino business right now,” said Kevin Rennie, a South Windsor attorney and political columnist. “You would think they would want to begin [East Windsor] rather than Preston.”
