Norwich - Mayor Peter Nystrom plans to propose the creation of a revolving loan program that would provide local loan money to match state manufacturing assistance funding in an effort to attract manufacturing businesses to Norwich.

Nystrom will ask the City Council Monday to designate the Norwich Community Development Corp. to write a proposed development plan that would include the manufacturing loan program, hold public meetings on the plan and submit it in spring to the City Council for approval. Under state statutes, the plan also would have to be approved by the state Department of Economic and Community Development and the Office of Policy and Management.

An outline of the proposed plan, dated Dec. 31, provided by NCDC calls for a loan fund starting with $800,000 in bonded money provided by the city of Norwich that could be loaned to manufacturing businesses committed to locating in Norwich. Money paid back by companies would be placed back into the loan program for future allocation.

Nystrom's resolution will be discussed by the City Council at Monday's 7:30 p.m. meeting at City Hall. The meeting will begin with Nystrom's annual State of the City Address.

Nystrom said city officials have been working with a potential first recipient already, but he could not provide details. Nystrom said a manufacturer with about 50 employees located elsewhere in Connecticut is interested in moving into the Stanley Israelite Norwich Business Park with assistance from the state Manufacturing Assistance Act of 1990.

NCDC President Robert Mills said currently, Norwich is at "a distinct disadvantage" compared to other municipalities because of lack of available manufacturing land and existing industrial zones with obsolete buildings difficult to redevelop.

He envisioned the new manufacturing loan program to encompass all existing city industrial zones. Once the city's Plan of Conservation and Development is completed, NCDC hopes to work with city planners and the City Council as the zoning board to "get creative" in allowing some smaller assembly operations or small technical labs - considered manufacturing in current zoning regulations - in other zones.

Mills said he has no interest in expanding traditional industrial zones in the city.

Mills estimated Norwich has lost out on opportunities to attract about a half dozen manufacturing entities to the city because of siting problems, including Nalas Engineering, which located in Essex and one medical equipment assembly operation.

Peter Lent, assistant executive director of the DECD's Office of Business Development, said he is not aware of Norwich's interest in creating a development plan tied to the state programs, but would look forward to working with the city on the plan.

Lent said under the state Manufacturing Assistance Act, a municipality typically designates an implementing agency - as NCDC would be under Nystrom's proposal - to write a municipal development plan. The plan must be approved by the DECD and OPM.

The act has two distinct programs, a municipal development project and a business development project. A loan program to businesses would fall under the business development project, while a municipal project would typically include infrastructure improvements.

Nystrom said the proposal is just beginning to be defined. Public meetings will be held on the proposed plan when it is better defined, and the City Council would have the final say on whether to approve a proposed plan. Mills said he hopes to present the plan to the council in April.

"It's very important to say this is a loan program," Nystrom said. "We're not handing money out."

c.bessette@theday.com