Allied Development Group LLC, a real estate development company based in Farmington, originally had a contract with the state to purchase and develop the land and former hospital into a seaside hotel and park. The sale of the property was part of the 2010 budget voted on by the legislature and approved by Gov. M. Jodi Rell in an effort to raise money.

In 2014, the Waterford Planning & Zoning commission voted down Allied’s plan to build the hotel and park. Mark Steiner, owner of Allied Development, immediately filed an appeal in New London Superior Court. However, before his case could be heard, Malloy cancelled the contract saying that Steiner had failed to acquire the proper land-use approvals. Steiner’s agreement with the state, however, stipulated extensions if the developer encountered zoning issues. Steiner has now filed a $20 million suit against the state for violating the terms of the contract. The suit is currently pending before the Claims Commissioner.

Malloy’s directive and cancellation of the contract may have violated state law. According to Connecticut’s State Real Property law, statute 4(b)-21, any agency that wishes to develop state land must submit a plan to the secretary of the Office of Policy and Management, along with a budget, to be analyzed within 30 days.

The OPM confirmed that no analysis of DEEP’s plan exists and offered a March 2015 letter from OPM secretary Benjamin Barnes to DEEP commissioner Robert Klee as justification for transferring the property to DEEP.

“As you are aware Governor Malloy has directed that DEEP convert the former Regional Seaside Center in Waterford to a state park,” Barnes wrote in the letter. “In order for the planning and implementation process to move forward, I believe it is appropriate for custody and control of this property to be transferred from DAS to DEEP.”

Steiner said he expected to create 300 jobs through the building and operation of the hotel and park. Allied Development had received approval from DEEP to create a park open to the public at no cost to the state as part of their plan.

Connecticut is currently having problems keeping its parks open due to budget cuts. The DEEP is closing three campgrounds and cutting back on lifeguards and park maintenance. The park closures come on the heels of the state laying off workers due to budget deficits. The state spends approximately $18 million per year operating parks and beaches, slightly less than the estimated cost of the new project.