The Palatine village council this week denied a plan to build 47 single-family homes on the former Camelot School property, citing the developer's need to conform to lot- and street-size standards.
At the same time, officials left the door open to the proposal if significant changes are made.
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"We want to see this area developed ... but we want to do it responsibly," Councilman Aaron Del Mar said.
K. Hovnanian Homes, the nation's sixth-largest homebuilder, wants to develop a subdivision just east of the Palatine Stables on Northwest Highway. Representatives said it would be a big improvement over what's there now.
"(The Camelot School) has been abandoned and deteriorating for six to seven years now," Brian Murphy of K. Hovnanian said. "It's part of the gateway or welcome center to the west side of Palatine."
Camelot was a private school that served kids with behavioral problems and other disorders for more than 30 years beginning in 1974. It moved its operations to Maryville in Des Plaines in 2006.
Murphy said the company had worked extensively with the village staff and agreed to scale back its proposal from 58 homes. He also said the 12-acre site is challenging because of its unique shape, and that it wouldn't be economically feasible to have the required 75-foot-wide lots and 60-foot-wide streets.
Village Manager Reid Ottesen said only the Meadow Lake subdivision near Williams and Cunningham drives has narrower streets, and that's because Palatine annexed the area. "Quite frankly, it's a nightmare for us to maintain for our snow removal efforts," Ottesen said.
Officials said they'd consider the development if the streets were private, but K. Hovnanian shot down that idea. The company said it would look into returning with a modified proposal.
"We certainly don't want to send you packing, but we have certain standards," Councilman Brad Helms said.
Since the Camelot School closed, there hasn't been much interest from developers aside from a 2006 proposal to build 89 townhouses that didn't go anywhere.