Here is a glossary to help readers understand the city agencies, development incentives and financial subsidies that are fueling the major apartment projects rising in downtown New Rochelle.

 

New Rochelle Industrial Development Agency (NRIDA)

The IDA (Industrial Development Agency) is a government body authorized by New York State to invest taxpayer money to promote and incentivize development that encourages business growth and job creation.  Many localities have their own IDAs, which typically provide real estate developers with public subsidies such as exemptions from mortgage recording and sales taxes and long-term reductions in property taxes (“Payments in Lieu of Taxes,” or PILOTs).  The IDA’s benefits and tax breaks are packaged as Uniform Tax Exemption Programs (UTEPs).  New Rochelle’s City Council appoints seven board members to the NRIDA for staggered three-year terms.  The City Manager is the Chair of the NRIDA, and the Development Commissioner is its Executive Director.  Developers pay fees to the NRIDA when they apply for taxpayer subsidies, and these fees are used largely to pay for city development staff and outside consultants who work with developers on their applications for financial incentives. 

Click here for a more detailed explanation of this key city agency.

Uniform Tax Exemption Program (UTEP)

A package of public subsidies given through tax exemptions dispensed to developers by a city’s Industrial Development Agency (IDA).  These taxpayer investments are codified and in theory are to be given uniformly to all developers to avoid favoritism.  Although New Rochelle’s UTEP is similar to others across New York State, there is little to no oversight to determine if the benefits are truly required by the developer in order to build a project.  

Corporation for Local Development (CLD)

This is another State-chartered non-profit development corporation, like the IDA, which is a party to the Master Developer Agreement “with the authority and power to own, lease and sell personal and real property” for the … “charitable or public purposes of relieving and reducing unemployment, promoting and providing for additional and maximum employment, bettering and maintaining job opportunities, instructing or training individuals to improve or develop their capabilities for such jobs.”  In effect, the CLD has been used to deliver municipal properties to the Master Developer and its strategic partners and designees. 

The CLD Board is the same as the IDA Board, with the same Executive Director, who is also the city’s Development Commissioner and Deputy City Manager.

Planning Board and Zoning Board

The Planning Board and Zoning Board are volunteer boards appointed by the City Manager to review building plans and grant variances (exceptions to zoning codes).   The Planning and Zoning Boards are assisted by the staff of the Planning and Building Departments and hold public meetings on a regular, usually monthly, basis.

National Development Council (NDC)/Grow America

An outside consultant that advises both developers and municipal agencies.  NDC recently changed its name to Grow America.  NDC designed New Rochelle’s basic UTEP and currently reviews developers’ requests for taxpayer subsidies to be sure they conform with program requirements.  Although NDC is paid by the New Rochelle IDA to review developers’ applications, it does no independent investigation or evaluation, nor does it advise the IDA.   NDC also has developer clients and raises investment funds and tax incentives for them.  At the end of all its reports to the IDA, NDC states: “it is expressly understood by all parties that NDC is not acting as your agent, advisor, municipal advisor, or fiduciary.  NDC may have financial and other interests that differ from yours.”

Downtown Overlay Zones (DOZs)

The Downtown Overlay Zones are several mapped areas of the City where zoning and building requirements have been changed to encourage development of certain types of real estate.  Building and financial incentives are designed in each DOZ to encourage high-rise, mid-rise, or street-level development, for residential, commercial or public use.  Cappelli’s projects are in DOZ 1 (“Downtown Core District”) and DOZ 2 (“Downtown District”).  

Master Developer Agreement

This is a significant agreement signed in 2015 between New Rochelle (through various entities controlled by the City, including the CLD) and RXR, a major NYC and national developer that was selected to be the city’s “Master Developer”.  The City project team is led by the Commissioner of Development.  The Master Developer Agreement entitles RXR to purchase any and all city owned properties (e.g., the municipal parking lots) for one set price determined by appraisal, and to either develop all or none of the properties, and/or to sell the properties to other developers for an undisclosed price and profit.  In 2015, when this agreement was approved by the City Council, RXR agreed to develop a master plan for the downtown area which would include amendments to zoning and building codes to encourage development (called the  Recommended Action Plan, or RAP); to design a local community benefits program that would address local job training and placement; and to work together to develop public funding and financing programs for private development. As Master Developer, RXR is allowed to form a joint venture with a “Strategic Partner” to acquire and develop the municipal properties, and they “shall not be required to disclose any business terms or agreements between them to the City Project Team” (Master Developer Agreement, Article 6.01, page 25).  

Recommended Action Plan (RAP)

The Recommended Action Plan is the master plan created in 2015 as a result of the Master Developer Agreement.  The RAP is the product of RXR working with the City’s Development, Planning, and Building Departments and third party consultants to design zoning and building code changes, to streamline building department reviews and approvals, to develop programs to incentivize more profitable building opportunities, to create financial incentives, and to periodically update these incentives to address changing market conditions.  The RAP, with all its various components, was approved by the City Council in 2015, and its approval along with the Master Developer Agreement paved the way for the development of up to 10,000 apartment units in over 30 mid-rise and high-rise towers clustered largely in the downtown.

Area Median Income (AMI)

The “Area Median Income” is the income in the middle of the range for families in a given area.  “Median” means that half of the families of a given size in that area earn less than this income and half earn more.  Government agencies may require new housing developments to include a certain number of units that are “affordable” to families making a certain percentage of the local AMI.  The AMI for a family of a particular size in a given area is calculated from census data.

When determining “affordability” in New Rochelle, the City uses the AMI not for New Rochelle, but for all of Westchester County, one of the wealthiest counties in the United States.  In 2022, the median income of Westchester County was $124,750 for a family of three, while in New Rochelle, the median household income for a family of three was $77,320, or 38% less.  Developers in New Rochelle can therefore meet requirements for “affordable” housing in New Rochelle while charging rents that might be considered affordable to residents of suburban Westchester, but not to most residents of New Rochelle. 

Affordable Housing

The federal government defines housing as “affordable” when its cost, including utilities, is less than 30% of a family’s monthly gross income.  Families that spend over 30%  are referred to as “cost burdened,” and those that spend over 50% as “severely cost burdened.” 

A rental apartment is defined as “affordable” if the rent is less than 30% of an income level set by the government for a particular family size and geographic area.  Only families earning less than that income are eligible to live in “affordable housing.”  But if a family makes much less than that income, the rent will be more than 30% of their income, so that rental unit will not be affordable for them.  As a result, “affordable housing” is really only “affordable” to families making close to the income limit set for that housing. 

The federal government sets the income target for “affordable housing” in a particular area based on the “Area Median Income” (AMI).  New Rochelle’s Affordable Housing requirement originally was “all projects opting into the DOZ are required to permanently provide 10% of residential square footage at 80% Area Median Income (AMI) or make a deposit into the Affordable Housing Fund.” (At the time this requirement was approved, a developer could provide the affordable housing in a location outside of the DOZ, and even outside of New Rochelle, and still satisfy this requirement.)  Currently, New Rochelle requires developers to rent 10% of apartment units to households earning an average of 70% of AMI. This means that 10% of the apartments built in a project must be reserved for families that earn less than 70% of the area median income, and these families will be charged 30% of that amount (70% of AMI) for rent and utilities.   Developers are also permitted to rent units at a combination of higher and lower AMI levels that average out to 10% of units at 70% of AMI.  

Community Benefits Bonus (CBB)

The Community Benefits Bonus (CBB) is an upfront, one-time payment that entitles a developer to increase the size of a project above what the DOZ zoning allows, typically adding four floors above the maximum height of 24 floors in the downtown DOZ (allowing for the five 28-story projects being built in New Rochelle by Cappelli and RXR).  This is a “density bonus” which allows for a larger project that is more profitable for builders, developers, and investors.  The city points out that 10% of the additional units, like 10% of all units in city projects, must be “affordable housing” and claims that this density bonus “incentivizes the creation of Affordable Housing by allowing an option for developers to achieve additional height by providing additional affordable housing options.”  This is a spurious rationale that is entirely to the benefit of a developer.   Of the five 28-story projects in New Rochelle, the extra four floors achieved through the CBB density bonus included only nine additional affordable apartments.

PILOT Program

PILOT is an acronym for Payment in Lieu of Taxes.  In effect, it is a reduced property tax.  In New Rochelle, PILOT payments replace taxes that would otherwise be paid to cover City and County services (police, fire, administration, sewer and infrastructure), and School and Library budgets.  The IDA agrees to cut property taxes for a DOZ project by 40% – 70% on average, over a period of  10, 15, 20, or even 30 years, depending on the development and the request of the developer.

New Rochelle’s PILOT program was updated when the DOZ and RAP were approved to incentivize development.  In theory, the PILOT program incentivizes development by helping to keep apartment rents low enough to attract tenants, thereby preserving a margin of profit for the long-term investors and owners of the project.  

But when developers pay lower property taxes, all other taxpayers must pay more to balance the City, County, Schools and Library budgets.   

Mortgage Recording Tax Exemption

The city and county typically charge a 1% to 1.3% fee for recording the mortgage loans used to finance development projects.  This fee is waived by the IDA for projects in the DOZ and the one-time tax revenue to the city is lost.

Sales Tax Exemption

The City and State sales tax of 8.375 % on construction materials (estimated to be 40% of total project cost) is waived by the IDA for developments in the DOZ.   This reduces project cost by 3-4% during the construction phase of development.

Opportunity Zone Designation  

An “Opportunity Zone” is a Trump-era Federal tax-credit program for investors in development projects located  in areas designated as “economically distressed.”  The tax credits allow investors to avoid taxes on capital gains, or profits, made in previous investments as well as on capital gains (profits) made by investing in a project in the Opportunity Zone.  This tax shelter helps developers raise more money from investors, allowing them to then put only small amounts of their own capital into a project—typically only 10% of the total amount of equity required to finance and build a commercial project.  New Rochelle has two such zones located in the downtown area. 

Fair Share Mitigation 

An upfront, one-time payment intended to compensate the city for the increased use of certain community infrastructure and services by the occupants of a development.  

Review Fees

New Rochelle charges developers various fees to submit applications and their plans to the Planning Board, the IDA and the Buildings Department.  Presumably most of these fees cover the administration’s cost of current staff, overhead and consultants who review and approve the applications and to monitor construction.   Although the city may claim that it benefits from these one-time payments, no evidence has been provided that city residents benefit from payment of these fees.

Open Space and Recreation Fees  

An upfront, one-time payment made to avoid building open space for public use, such as a park, plaza or playground, or to allow a developer to build on an entire site rather than require setbacks for landscaping and green space around a building, which is otherwise required under the building code.  It is unclear how these payments are spent or whether they provide any tangible benefit to the city’s residents.