Preston - Town leaders are negotiating with state and federal officials in attempts to salvage grants and loans for the cleanup of the former Norwich Hospital property so they can present new packages to residents at a town meeting on Thursday and a referendum Dec. 18.

Residents last week rejected an $8 million loan package that included accepting a $4 million low-cost state loan and matching it with a $4 million town bond. The loan match also would have counted as a match for a $964,000 federal grant from the Economic Development Administration.

With the first referendum defeat, the federal grant expired on Saturday.

But town officials hope to keep both the federal grant and the favorable state loan terms alive and win voter approval for a smaller loan package totaling $4 million, with $2 million from the state Department of Economic and Community Development and a $2 million town bond.

Just hours after the referendum defeat, Town Planner Kathy Warzecha was in contact with federal EDA officials in an effort to receive a one-month extension of the grant deadline to Jan. 1. Warzecha told the Preston Redevelopment Agency Thursday that the initial grant application was very complicated and the town was fortunate to win grant approval. She did not want to give up on the effort.

Warzecha said if the grant extension is not approved, then the town will reapply for the EDA grant at the end of March if voters approve the smaller loan package. She said EDA officials promised "extra scrutiny" of any future Preston application.

PRA Chairman Sean Nugent said Monday that officials have reached out to U.S. Sen. Richard Blumenthal and U.S. Rep. Joe Courtney for assistance in getting the grant extended.

Nugent said he also is in contact with state DECD officials to determine if the state will retain the loan offer for half the original $4 million. The original terms included a 1.5 percent interest rate, deferral on principal and interest payments for five years and a provision that would forgive $1 million of the loan for every 100 permanent jobs created in development of the property.

The PRA sent the new $2 million state loan proposal to DECD Deputy Commissioner Ronald Angelo and is awaiting a response. Nugent said town officials received no written approvals from either the state or federal agencies Monday.

While the larger loan package would have covered environmental cleanup and demolition of most of the remaining buildings on the hospital campus - including the large Kettle and Lodge buildings - the smaller package would leave the largest buildings standing and focus on smaller projects, PRA officials said.

If the loan package is rejected a second time by voters, the PRA might be forced to shut down operations when environmental abatement and demolition grants in hand are spent. That work is expected to be done by March or April.

The town also has applied for three $200,000 federal Environmental Protection Agency grants, but if approved, that money would not become available until next fall.

c.bessette@theday.com

Upcoming events

Preston Town Meeting on $4 million loan proposal for cleanup of Norwich Hospital: Thursday, Dec. 6, 7:30 p.m., Preston Veterans Memorial School.

Referendum on $4 million loan proposal: Tuesday, Dec. 18, noon to 8 p.m., with voting at Preston Town Hall.