The late DeWitt Wallace and his wife, Lila Acheson Wallace, founders of Reader's Digest, have donated $12 million to Colonial Williamsburg to finance reconstruction of the nation's first public mental hospital and construction of a decorative arts museum that will be connected to the hospital by an underground concourse.

"It is a different combination," said Norman Beatty, director of public affairs for Colonial Williamsburg. "But this allows us to do two things at once and the Wallaces agreed both should be done."

Part of the project involves the reconstruction of the 18th-century mental institution, originally called The Public Hospital For Persons of Insane and Disordered Minds. Among the original trustees of the 1770 hospital, which was leveled by fire in 1885, were Peyton Randolph, president of the First Continental Congress, and Thomas Nelson, a signer of the Declaration of Independence.

The reconstructed building, which will be named "The Public Hospital," will contain a gallery illustrating the treatment of mental illness in the 18th and 19th centuries and artifacts excavated from the original hospital site in the Virginia town. "I don't think this will be a fun place but I'm sure it will be educational," said Beatty.

The building will be linked by underground passageway to the DeWitt Wallace Decorative Arts Gallery which will house early American textiles, ceramics, prints and other objects in the permanent Williamsburg collection. A restaurant, auditorium and offices are to be included in the complex.

The Wallaces' gift is second in size only to the more than $90 million given to Colonial Williamsburg for recreation of the colonial capital of Virginia by the Rockefeller family, Beatty said.