Louis Cappelli takes advantage of huge public subsidies and incentives, while public needs like affordable housing, family-supporting jobs, parking, and open space go unmet.

[Editor’s note:  This series includes a Glossary to help readers understand the city agencies, incentives, and subsidies that are fueling development in downtown New Rochelle.  Links to the Glossary are in red; links to outside sources are in green. This article was updated on 1/29/2024 to include additional information about the Cappelli project at 247 North Avenue.]

Developer Louis Cappelli’s $100,000 contribution in June 2023 to the Westchester County Democratic Committee, with $60,000 going to a candidate for mayor of New Rochelle, has raised questions about his relationship with the City and concerns about his past, present, and future influence.

New Rochelle has proved to be a profitable place for Cappelli to do business.  The largest projects in downtown New Rochelle – six buildings with nearly 2 million square feet of luxury and market rate apartments – are Cappelli projects.   He and his partners are benefiting richly from the 2015 rezoning (the Downtown Overlay Zone, or DOZ), a Master Plan (with RXR, a major regional developer, as “Master Developer”), streamlined building and planning regulations, and significantly, financial and building incentives, all approved by the New Rochelle Industrial Development Agency (NRIDA), a city agency led by the City Manager. 

The incentives received by Cappelli and other developers are paid for by all the taxpayers in New Rochelle.  In theory, the transformation of downtown New Rochelle will lead to business growth, more jobs, and more tax revenue that will benefit the city as a whole.  But what exactly did the City agree to in its negotiations with the developers?  What will be the long-term financial impact on the city and its taxpayers?  How is the development really affecting opportunities for sustainable, affordable housing and family-supporting careers for New Rochelle’s current residents?  Where are the opportunities for home ownership and development of generational wealth?  How is the quality of life in New Rochelle being altered?  As New Rochelle has encouraged  developers to take over public land and reshape the downtown with massive rental properties, has the city invested as much in the future of  its current residents as much as it has in the profits of the developers?  Who got the better of these deals?

Cappelli’s History of Millions in New Rochelle:  How It Began

Cappelli’s “Millions” started with his development of the one million square-foot New Roc City in 1999 and continued in 2007 with the 40-story Trump Plaza that punctuates the skyline – a condominium project with 215,000 square feet of luxury apartments and 140,000 square feet of retail space.  Ten years later, in 2017, Cappelli was among the first developers to mine the benefits of the rezoning of downtown New Rochelle and  NRIDA’s  financial incentives by building “The Standard” at 251 North Avenue.

 

The Standard is a 14-story building with 112 “micro-units” of market-rate housing that, despite its North Avenue address, faces LeCount Place, across the street from New Roc and Trump Plaza.  When the project was approved by New Rochelle’s planning and development departments, Cappelli was allowed to increase the profitability of his project by paying modest fees rather than meet the city’s declared requirements for affordable housing, parking, and open space.

By paying $344,000 to the Community Benefits Bonus (CBB) Fund, for example, Cappelli was able to avoid building parking spaces for his tenants on this small site and instead build more market rate apartments.  The city allowed  his tenants to  use New Roc public parking, in effect privatizing public parking space.  

And by paying $1.4 million to the Affordable Housing (AH) Fund, Cappelli avoided having to rent 10% of the apartments to residents at “affordable” rates (roughly 10% to 20% less than market rents).

What did the city do with this $1.74 million in one-time, up-front contributions, for which it sacrificed affordable housing and parking?  How did it benefit the city? 

The public doesn’t  know.  There is no detailed public reporting on how contributions to the CBB and AH funds have been spent.  In 2015, when the City Council first adopted resolutions and legislation regarding the AH and CBB programs, the Commissioner of Development was required to provide detailed reports of the sources and uses of these funds at five-year intervals.  When the AH legislation was amended in 2021, the reporting requirement for the AH fund was dropped, and a paragraph was inserted that allowed AH funds to be used for administrative expenses, including City salaries and outside consultants.

In addition to the AH and CBB building incentives, the IDA granted Cappelli upfront tax breaks of $1.2 million in the form of sales and mortgage recording tax exemptions and a significant discount of property taxes over a 20-year period.  These property tax breaks – through NRIDA’s “Payment-in-Lieu-of-Taxes” (PILOT) program – will allow Cappelli to save at least $1.1 million during the first five years of the project’s occupancy,  representing an average annual property tax discount of over 60%. 

In his application to the NRIDA, Cappelli claimed that these tax breaks were necessary to make the project financially viable. The NRIDA Board agreed. 

The NRIDA tax breaks were designed originally by the IDA’s financial consultant, the National Development Council (NDC, now known as Grow America), which serves not only as a consultant to municipal governments and nonprofits, but also raises money for developers.  Although the NRIDA pays the NDC to review developers’ applications, the NDC does not represent, nor advocate for, the City because of potential conflicts of interest.  Who does advocate for the City and the public in these complex deals?

More Cappelli Projects Follow, Bigger and More Ambitious

Following up on his success with The Standard, in 2019, Cappelli applied for incentives to develop Huguenot Towers, two very large projects rising together at the intersection of Huguenot and Centre Streets, known as “3Thirty3 Huguenot Street” and “The Centre at Huguenot”.  When added to The Standard, Huguenot Towers brings Cappelli’s current downtown development footprint up to nearly 1 million square feet. 

 

3Thirty3 Huguenot Street is a 435,000 square foot, 28-story tower of 285 luxury apartments, expected to cost over $137 million.  At the base of the building are seven floors with 243 parking spaces.  The project met the City’s minimum affordable housing requirement at the time by reserving 10% of the apartments, or 29 units, as “workforce housing.”  Cappelli agreed to cap rents on these units to make them affordable to tenants earning 80% of the Westchester county-wide Area Median Income (AMI).  

The Centre at 327 Huguenot Street is also huge, at 300,000 square feet, with 28 stories, 249 apartments, and an estimated cost of $125 million.  Cappelli assembled the site for The Centre by purchasing a public parking lot from the City.  Here too, 10%, or 25 apartments, will be rented as “workforce housing.”

In both Huguenot St. projects, Cappelli was able to pay modest fees in order to build much bigger buildings than the DOZ zoning regulations allowed.  

For 3Thirty3, Cappelli paid $2 million into the CBB Fund in order to build 52 additional apartments on floors 25 to 28, adding over $20 million to the value of his project.  He also paid $1.3 million in “Fair Share Mitigation” and “Open Space” fees, which allowed him to maximize the size of his project on a very small site with limited green space and public infrastructure, without offering additional public amenities to the surrounding neighborhood. Cappelli assembled the site for 3Thirty3 by purchasing a one-story car repair shop and a public parking lot from the City. 

 

And at The Centre, Cappelli is building four extra floors (an additional 40 apartments, worth at least $15 million to him) in return for paying $702,000 to the CBB density bonus fund and for spending $750,000 to improve a small retail space he owns in Trump Plaza, which he is currently renting to the City (for $127,000 per year for three years) to house a program training New Rochelle residents for non-union, poverty-wage construction jobs.  Cappelli will also pay $875,000 in Fair Share Mitigation and Open Space fees to the City, which will compensate the City for the lost revenue of its municipal parking lot and allow him to avoid certain building and zoning code requirements.

In addition to these “density bonuses,” Cappelli received additional huge financial incentives from the IDA.  For 3Thirty3, he not only received $4.5 million in upfront exemptions from sales and mortgage recording taxes, but he was also granted 15 years of long term PILOT property tax discounts.  In just the first five years of project occupancy, Cappelli will be exempted from $4.2 million in property taxes, a 74% discount from what the property would otherwise pay.  

And for The Centre, the IDA granted Cappelli $4.4 million in sales and mortgage recording tax exemptions, and PILOT tax savings over 15 years, with $3.6 million in savings during the first five years – again, a 74% discount.  

Cappelli’s application to the NRIDA for the two Huguenot St. projects noted that he was able to raise significant equity from investors — aka OPM, or Other People’s Money — for this project because it is situated in a Trump-era Opportunity Zone, which allows investors generous credits against their Federal taxes.  Again, Cappelli told the NRIDA board that without all of these building and financial incentives, the projects would not be feasible.

Cappelli’s IDA submission for 3Thirty3 can be seen here (starting on page 69), and his submission for The Centre can be seen here (starting on page 12).

Two More Huge Projects, With More Huge Financial Benefits for Cappelli

The other two pieces in Cappelli’s downtown “Millions” are two large RXR projects at Church/Division Streets – One Clinton Park and Two Clinton Park– occupying  the former site of  a municipal parking garage.  The Clinton Place buildings are RXR’s signature projects,  conceived in the 2015 Master Plan that ushered in the rezoning, the relaxed approvals process, the various benefit programs, and the NRIDA incentives.  

 

As New Rochelle’s “Master Developer,” RXR has special rights to purchase City-owned land and to re-sell the land to other developers without disclosing the sale price.  According to Cappelli’s website, Cappelli is the general contractor for the Clinton Park projects.  Meanwhile, RXR is a partner in the Huguenot Towers.  These two behemoth developers are working hand in glove.

 

On the Clinton Park development, RXR is the principal sponsor and arranged the financing, and Cappelli is responsible for building the project.  Building these projects has brought Cappelli and RXR substantial profits, and has helped them learn the ins and outs of New Rochelle’s IDA, its financial consultants, and the City’s Development Department and Planning Board.  Cappelli applied these lessons to obtain the same level of outsize benefits from the City in his work as developer of Huguenot Towers.

The Clinton Park projects have reshaped New Rochelle’s downtown with 742 luxury apartments (with valet parking) occupying a total of 872,000 square feet in two 28-story towers.  Each of the towers has the four additional “bonus” floors through the CBB density program, upfront tax exemptions worth $13 million, and 20 years of PILOT subsidies totaling nearly $20 million, according to the RXR applications submitted to the NRIDA (Tower A on pages 82-164, and Tower B on pages 165-249).

There will be no affordable housing or workforce housing among the 742 luxury apartments at Clinton Park.  On the contrary, the City encouraged RXR to keep this development socioeconomically segregated.  Instead of requiring affordable apartments in these buildings, the City allowed RXR to put its affordable housing in Georgica Green’s 11 Garden Street development, a 19-story tower with 219 affordable housing units built adjacent to I-95 and across the street from the new Westchester County courthouse, also on the former site of a municipal parking lot.  This deliberate offloading of “affordable” housing units to a less desirable site continues and compounds New Rochelle’s long history of intentional, legalized residential segregation.  

When the developers of 11 Garden Street applied to the Westchester County Planning Board for infrastructure funding, the Westchester Board  told the City it was “displeased that the affordable units are not interspersed within the market rate units,” but it still approved the application. 

RXR obtained approval to build the additional four floors in the Clinton Park buildings under the CBB density bonus by spending $4.1 million to improve the public sewer system that will serve the Clinton Towers and to build a public walkway between the two towers, on what would otherwise be a necessary site setback.  

One more huge Cappelli project, 247 North Avenue, is under construction.  According to the IDA’s approval package (pages 7-72), this project is similar to Cappelli’s other projects:  a proposed 29-story residential tower, with 244 apartments and 211 parking spaces occupying 373,000 square feet, and costing about $125 million.  The IDA agreed to sales tax and mortgage tax exemptions totaling $4.8 million, and significant PILOT tax savings over 15 years.  During the first five years alone, the PILOT tax savings to Cappelli exceed $3.7 million, representing an average discount of 74%.  The project is intended for empty nesters and professionals, with 25,000 square feet of high-end amenities.  In return for agreeing to rent 24 apartments as “workforce housing”. (i.e. affordable to residents earning less than 80% of County-wide AMI), and by paying $2.8 million in fees (for CBB, Fair Share Mitigation, Open Space and Recreation), Cappelli was able to maximize the size and profitability of his project with an extra four to five floors.  It is unclear whether the project will be required to meet the new Social Equity requirements under the city’s modified UTEP. 

 

Who benefits?

Cappelli’s deals with New Rochelle have dramatically altered the downtown area.  Huge new buildings cast dark shadows and dominate the skyline.  Public parking has disappeared, and there is little or no new green space.  Rents in these buildings are unaffordable for most local residents, and there are no new opportunities for home ownership.  Who has benefited from all this development?  

Clearly, these projects have been profitable for Cappelli and other big developers and their investors.  What have been the benefits for the New Rochelle community?  What will happen to property taxes for New Rochelle residents?  Have the city and the IDA done their due diligence to provide assurance that local residents will be protected?  Why is there so little transparency about these deals and their long-term impact? 

Finally, why does Cappelli make large campaign contributions that are routed to political candidates in New Rochelle?  According to Public Citizen, when a developer  receives financial benefits from a city government, and then hands over large campaign contributions to candidates who have led and are expected to continue leading that government, “most of us know precisely what happened: The corporate executives and officeholder[s] rewarded each other through the exchange of money, also known as a bribe.  But what we all know from common sense becomes clouded – and even denied – by the folly of our campaign finance system in which officeholders are required to raise campaign cash from the very same private interests that have business pending before them.” 

 In 1991, the US Supreme Court ruled that this kind of exchange of financial favors cannot be assumed to constitute bribery because such conduct “in a very real sense is unavoidable so long as election campaigns are financed by private contributions or expenditures …”

Will this “business as usual” in pay-to-play New Rochelle continue with the new Mayor and City Council? Only time will tell.