Gov. W. Mitt Romney last week signed a bill that provides $7 million in state money for demolition at the site of the old Northampton State Hospital.

The Massachusetts Development Finance Agency, a quasi-public organization with a regional office in Springfield, is leading the effort to redevelop the former hospital site into a mix of commercial and residential use. "We're delighted the Legislature is supporting the redevelopment of Northampton State Hospital with this important funding," said Adam M. Bickelman, spokesman for the finance agency.

"We feel the governor's signing of this legislation is a testament to the significance of the project to economic growth in Western Massachusetts."

Called The Village at Hospital Hill, it would be one of the biggest development projects in Northampton's recent history. When completed, it would include 207 units of housing and 476,000 square feet of office, retail and light industrial space, all within walking distance of downtown Northampton.

Bickelman said that nearly all of the $7 million likely will help pay for ongoing demolition of the main hospital building. Demolition of "Old Main" began in July and is expected to be completed by fall of next year, he said.

Northampton Mayor Mary Clare Higgins credited state Rep. Peter V. Kocot, D-Northampton, and state Sen. Stanley C. Rosenberg, D-Amherst, with working hard to push through the funding.

The House and the Senate passed the bill Aug. 31.

Kocot said yesterday that it was the fifth state appropriation he has helped obtain for the project, and also the last major piece of state funding.

"I'm very optimistic the project will now proceed rapidly and benefit all of Western Massachusetts," Kocot said.

He praised the Romney administration for its continued support of the Village at Hospital Hill.

The $7 million was contained in a larger bill that provides new methods for communities and the state to help pay for infrastructure improvements for large private development projects.