City to negotiate developer’s agreement for residential houses

NEW LONDON – The New London Economic Development Committee approved directing city staff to work on a developer’s agreement with Tom McHugh Construction for a 30-lot residential and two-lot commercial development on the north side of New London.
The approval came at the committee’s July 28 meeting. The New London Press Star first reported on this proposed development in the Aug. 6 issue of the Press Star.
Tom McHugh, of Tom McHugh Construction, addressed the committee at its July 28 meeting, and provided it with financial details about a 30-lot residential development he is proposing to the city. The development would be located on the northside of Walmart, and would include two commercial lots in addition to the 30 residential lots.
“We personally are not commercial builders at all, so we came up with a proposal to partner with New London to give the two commercial lots to New London so that they can realize the TID on those,” McHugh said.
The concept of the proposal was previously presented at the July 9 New London Plan Commission meeting. Not discussed at the Plan Commission meeting were the financial aspects of the proposal. McHugh said there are a few things that make the development proposal expensive.

“One is the road extension, the road to the north from the apartments isn’t there right now to the road that goes past the commercial units,” McHugh said. “And the fact that we’re not keeping the commercial units. We’re going to give those to New London.”
McHugh said his company is ready to start work on the development once a developer’s agreement is finalized. In the meantime, preliminary engineering can be completed, but that costs a “significant amount of money.”

The proposal
As stated, the two commercial lots to be developed would be given to the city of New London, which could do with them as they want. The city of New London would retain the TID of the commercial lots.
McHugh said he was asking for a 75% pay-go incentive reimbursement through the MRO for the 30 residential lots that are created.

“Pretty simple, but this is our overall ask, which would make the project work for us,” McHugh said.
New London City Administrator Chad Hoerth said that city staff has indicated that it can work with the terms presented by McHugh.
“Obviously we have to negotiate and get the full details with the developer’s agreement with an attorney involved,” Hoerth said. “… The point of the conversation of this, like Tom was saying, he’s got to start spending money to move to the next step, so he wanted to get a good feeling from the committee.”
Hoerth said the developer would pay for the 30 lots, the street improvements, and the utilities. There would be no cost to the city.
Regarding the 75% pay-go incentive, Hoerth said every year that the developer pays its increment on the lots that are there, 75% of the increment amount would go back to the developer to help finance the development and the public infrastructure that would be put into the development.
Ald. Tim Roberts asked if the city owned the land that would be used for the 30 residential lots.
McHugh said his company is under contract to purchase the land from a private party.
He added that the two commercial lots are being developed and given to the city because city officials indicated they would like some commercial properties in the area.
“We created this proposal as a partnership kind of thing where we’re taking the residential lots and giving New London two commercially developed lots that you can do whatever you want with,” McHugh said.
The average sale price for houses constructed on the 30 residential lots would be around $340,000, McHugh said.
“We develop and build out all of our lots,” McHugh said. “We don’t sell lots. So, we will build some model homes, build some spec homes, but our primary business is pre-selling.”