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Developers Tell City - We Got Nothing

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Developers Tell City - We Got Nothing

November 30, 2009 - 13:31
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The November 10th City Council meeting had representatives from the Cappelli organization and Forest City Enterprises provide their version of an update on where things stand regarding each of their projects. If you got a chance to watch it, I'm sure you have an opinion about how bad things are for both of the developers. This is my opinion. Mr. Apicella (from the Cappelli group) was very animated in his pitch to convince council that the upcoming request for a record 13th extension is a necessity to save the project and give them more time to "unravel" the financing products needed to go forward. Seems to me, they're trying to "find" money to keep themselves afloat. When asked about the timeframe, Mr. Apicella pointed out that in these desperate times, the city should be reinforcing the relationship and be supportive of the developer. So much so, he spoke in terms of when they get their IDA sweetener, it may be more than originally thought to be (at which point someone suggests he use the word if instead of when). Promises of more retail (even though they haven't closed the deal with Target/Kohl's) to sit alongside the 100,000 sq/ft of vacant space in the Trump building made it hard to believe this is the right move for New Rochelle. By his own admission, the market is saturated and no one is building until the market turns around. Granted, we are in a bad climate, but maybe it really underscores the fact that there can be too much in one place. Meanwhile, the properties along Lecount and Anderson sit, stagnant, handcuffed and unable to move along and contribute to the city in any form, fitness club - gone, skating rink (could have been used all this time)- gone. The Nov. 30 issue of the Westchester Herald seems to support the idea of Cappelli's lack of money and shows how the area is being idled.

So, I guess you need to ask the question, how much of the risk and costs are the taxpayers willing to subsidize as we continue to privatize the profits? Holding the downtown as ransom until private developers are ready to "invest?" in the city. Sometimes you just have to cut your losses and move along. As for Forest City, a very subdued Abe Naperstek painted a bleak picture as well saying that nothing is coming up out of the ground until things get better. After hearing his commentary, I'm of the opinion that Forest City's attitude is, if "we" get an extension, fine, but we're not going to jump through any hoops to hang on to it. They have bigger fish to fry and their not in Echo Bay. When he was asked why Forest City, in cancelling so many other projects, held on to Echo Bay, the first words out of Mr. Napersteks mouth were "WE want" a presence in Westchester. Nothing about what a great thing it is for New Rochelle. All in all, not very impressive, he was only up for about 15 minutes, and it appeared as though they had nothing to offer. Does anyone know why he felt he needed to bring his lawyer with him?

As with LeCount, the area is in limbo, even if there was a better way to move forward(and there are plenty of ideas), it's all being held up to suit a multi-billion dollar corporation who tells us nothing will happen in the near future. They've leased the only property they reportedly own for a 3 year period. That says it all. If Forest City were to walk away and lose the 2 million dollars they claim to have into the project, it wouldn't be much of a loss. Percentage wise, I'm sure most of us have lost a higher percentage of house value or retirement fund in the last 2 years. Some have lost everything. Again, socializing the risk/debt and privatizing the profits, ask yourself, who really benefits? Destroying the quality of life in the East End neighborhood and Sutton Manor while costing the city a minimum of 40 to 60 million in lost tax revenue coupled with increased burden on city services? You call that a deal? Look at your next city tax bill. The upcoming school tax bill, $700.00/year sewage assessment, county tax increase, your water bill is just about doubling. Now is not the time for us to be supporting the developers. If anything else, they should be supporting the taxpayers. Say no to extensions. It will sharpen everyone's senses and give developers a chance to show just how committed they are to New Rochelle, and, it will open the field for anyone else interested in participating. The traffic/environmental studies are outdated anyway and should reflect the most recent data. Time to step back and reevaluate the master plan. If you have an opinion, tell your councilperson, tell the mayor, tell your neighbor. Do something before it's to late.

Noam Bramson, Mayor Phone: (914) 654-2150 Fax: (914) 654-2357 E-mail: [email protected]

Louis Trangucci, Council Member, District #1 Home Phone: (914) 235-0499 E-mail:[email protected]

Albert Tarantino, Council Member, District #2 Contact Number:914 633-1985 E-mail: [email protected]

James Count Stowe, Council Member, District #3 Phone/Fax: 914 633-1049 E-mail: [email protected]

Councilman Richard St. Paul, District #4 Phone: (914) 420-6887 E-mail: [email protected]

Barry R. Fertel, Council Member, District #5 Phone: (914)-740-4346 E-mail:[email protected]

Marianne L. Sussman, Council Member, District #6 Phone: (914-740-7385 E-mail: [email protected]

There are 5 Comments

This morning Anthony Galletta said Avalon is looking to sell building one and wants to transfer the tax abatement agreement (payment in lieu of taxes) to a new owner. Are New Rochelle residents considered that naive that this tax abatement transfer is even suggested? Where is all the sales tax and jobs this development was supposed to generate?

Great post John I hope this drives the point home. Many concerned citizens have spoken out against the corporate welfare doled out over the last 20-years. While hindsight is 20/20 the important issue is admitting and learning from our mistakes so we don’t repeat them moving forward. That is why we as a City should deny any extensions to Cappelli for LeCount/Anderson and Forest City for Echo Bay. The article you reference points out that a Cappelli representative lied to city council about the status of the LeCount/Anderson project. I have submitted a FOIL to determine the current property tax status and will post upon receiving the information. The city council can have up-to-date tax information at will and if indeed this property is in arrears no extension should be considered let alone granted. Additionally, Cappelli has petitioned the Industrial Development Agency (IDA) for release from a $673,000 letter of credit offering his “personal guarantee” as a substitute not to mention the tax fiasco Cappelli has in White Plains. A thirteenth extension is unconscionable.

As to the question of Avalon, multiple sources tell me Avalon is in negotiations in an attempt to sell the first Avalon building. They say Avalon has offered half of what they determine they would owe the city as an incentive to get control of the land from the Industrial Development Agency (IDA) who owns the property in order to sell to a new entity and allow the transfer of the balance of the original tax abatement to the new owners. Naturally the current value and monies owed are a great deal less then the City's assessment that's why negotiations are proceeding. Also at question is whether the Payment In Lieu Of Taxes (PILOT) is transferrable. Keep in mind that currently Avalon pays $0 to the school district and has 80 students enrolled from both buildings at the tune of $20,000 per student which means the taxpayers of New Rochelle are footing a $1.6 million expense for the Avalon project just in terms of educating students enrolled. The City is interested in this quick money grab to ease the current budget situation and to ensure that next year’s budget is as minimal as possible entering an election year. If you believe this is a skewed insight examine the history of tax increases over the life of the tax-cap. The lowest increases and indeed increases well below the CPI were in election years. That’s why council will accept the 13.3% proposed increase. You thought the increase was 8.9%? Remember the City Manager’s proposed budget includes $2 million from the fund balance to lower the tax rate so in reality the tax increase is 13.3%. There is a suggestion to bond about $1.1 million which would lower this year’s tax rate but anytime you bond/borrow you increase budgets in future years. It’s the old saying; pay me now or pay me later. It’s beyond time for the city to take control of their destiny. Stop the corporate welfare, prosecute tax cheats and eliminate take-home vehicles while increasing revenue by focusing on outstanding building violations and finalizing open building permits to increase the tax roll.

Anthony Galletta

Thank you Warren, Anthony, and Political Forechecker for your follow up comments. In one of my first postings on this site I stated that even a bleak cloud has a silver lining and this kind of dialogue is exactly what that statement means. It's the current condition that's causing this type of scrutiny and that's a good thing. For so long, people have traditionaly been one step behind the wranglings of the administrations, past and present, but this site alone has enabled "real time" evaluation of current events and rapid sharing of information in a timely enough fashion to make a difference. So thanks, most of all, to you Bob!
We now see the accusations of the Cappelli org. lying to City Council, failing to satisfy contracted obligations, sticking it to the landowners, doing as little as possible to make as much profit as possible. They are ready to accept the Target/Kohls plan at half the original pricing and to quote Mr Apicella "it still works for us". That gives you an idea of just how much money they stand to make. Does half a paycheck "work for you"? For some lately, it has to.We don't need that here. Some have said they do it purposely to force the properties into being classified as "blighted" allowing the city to use eminent domain to transfer the property for a song to help the developer. Sound crazy? You tell me. Do we want to hand over a sweetheart deal to an organization exhibiting signs of the inability to perform as promised? As for Forest City, by their own admission, nothing is happening until the excess supply of retail and residential property is fully leased. One year, two, three, four years, who knows, so why tie the area up and lock out options. This is a time of opportunity not for the developers, but for the city. True wisdom and leadership gets a chance to shine here.
Is Avalon really trying to sell off? If you ever saw the movie "It's a Wonderful Life" the cab driver says something like "I've never seen one before, but that has all the markings of a bank run". Well, I've never "seen it" before, but a sell off has all the markings of a property destined for low income or section 8 housing. That isn't bad in and of itself, if that's what you're planning for. If it happens because you're just trying to unload the building for quick cash, then I think the taxpayers should have control of the negotiations. The city may not be able to control private business, but it can influence them with legislation.
You're dead on about the budget. Mr Strome has often said that people focus on the percentage number and not the actual money value. As if to say, it's not as much as you might think. If it really isn,t that much, then don't ask me to pay it. It is a lean budget, not much fat so to say. We are welcomed to sit down with officials and uncover the fat in the budget. Hardly the point. We have all had to make tough decisions the past 2 years and it's gone beyond cutting the fat out of our own budgets. Our fund balance hasn't been replenished, and many would welcome freezing our wages, it's a far better option than losing a job or benefits like so many have. Record job loss, record foreclosures, record increase in certiorary, vacant storefronts. There is no more fat. Tough decisions need to be made and it is not about maintaining the status quo. Making the decisions every citizen has made these past 2 years is the new status quo.
So, thanks again to all of you who contribute in the process, and to Bob, thanks for the soapbox.

They are up to extension 13. The Mayor has yet to open his eyes as he seems willing to go to any extent to make this lead balloon take flight.
Someone used Democratic channels to get Senator Chuck Schumer to twist the arm of the United States Postal Service so they would negotiate the sale of the Post Office as the developers request at the developers idea of market rate? When Politicians go to this extent you can bet they will go to any extent to try and get this off the ground. The City has given too much we can see that now as they are quite the mess trying to offset those PILOTS given out to Cappelli and Avalon as Sales Tax revenue is just not coming in.
The project is probably way too large in scale even for good economic times and it won't happen in the bad times. How about New Roc get their retail act in order and Trump Cappelli lease their spaces first before we continue with this GIANT.
AND I would want to see PILOT Money given on LeCount and Echo Bay match what comes in Sales Tax wise with firm ability to Clawback the PILOT Money if the dreams don't come true. The IDA has been manipulated as the mayor has placed both Strome and Sussman on the IDA Board. Without Claw Backs the Tax payers make up the short fall. See your 2010 tax hike to come for this example.

John I wrote a lengthy reply to your excellent report, but somehow it disappeared. Probably my oversight.

Let me try again. Your reports and facts are excellent and accurate. I have written about both echo bay and cappelli on many occasions and in summearizing my views

1. bail from echo bay even if the city feels it is a "legacy status" project. It is anything but and the developers are people who are not the sort we need in our city. we need to seriously lawyer up with an expert in contract law and in laws involving dissoving, chapter 11,13 or whatever. this organization is heavily in debt and in deep yogure in brooklyn among other places. echo bay will bring little or nothing to the table even if viable and strome said as much earlier when questioned about what we could expect from them in terms of support for our tax base.

my sense is that they would welcome negotiating a escape, but we are not appropriately lawyered up to take advantage of the situation. we need to get out and work out some advantage to the city while doing so.

and, yes this does open up questions about reusing the armory until it can be restored and used properly both as a city trasure for the community as well as an anchor for future developmental efforts.

cappeli is a different story as our investment there is more short-intermediate term important. a few things are both sad and troubling. one is that lou cappeli is a seriously ill man and it is not at all clear what will become of him personally and professionally. two, cappeli is close to bankrupcy as is trump towers. as far as extending the ongoing ida deal, it is not something that just can be abandoned. we are invested heaviy and it forms the fulcrum of downtown investment. of course, and i say this with great emphasis, propr lawyering of the type i mentioned earlier in this report, could help us impose conditions of a significant nature both on any renewal of ida and in the overall climate of the investment and venture strategies themselves. my sense is that we pretty much blinked every time a major developer went to invest; investment was and is sorely needed, but the conditions are changed, the strong are now weak and we can honetly, respectfully and firmly cut better deals with good lawyering.

of course target and kohls --- if indeed they are on board --- are not going to build and invest in this market. why should they? we have no leverage over these folks only leverage over cappeli and his folks. strome does not have the background nor does his staff the experise to cut deals with the above; how to dump forest city at advantage to new rochelle and how to build a more favorable arrangement with cappeli given his situation in the economy.

did i read that avalon 1 was for sale with a condition indicating they could simply transfer over their negotiated abatement status with a buyer? i would find this to be sad if the contract permitted such a condition and point out it is another case of inexpert lawyering. If they are putting avalon 1 up for sale, read the contract and simply indicate to them if not explicitly covered in the terms and conditions of the contract with the city that they are placing themselves in peril if they are assuming certain facts that are not in evidence.

ok, what does the sum total of all of this and who knows what else suggest to a voter, reader, taxpayer, even a resident outside of new rochelle. it says to me that venture capitalism is tricky business and you need top flight legal advice and the courage to create a blend of investment strategies that favor both parties. we seem to have acted as if we were sitting on some barren patch of land in cupcake south dakota rather than a city with all of the advantages we actually possess. again, look at what dan malloy had done with stamford connecticut, an additionl 35 or so minutes from the 45 minutes from broadway we have in new rochelle. the place is bursting at the seams with investmetns and no talk of avalon bailing or selling.

i don't think anything will come of contacting our councilmen, etc. but i urge everyone to try. try to get them to respond a little more businesslike than apparently barry fertel did when questioned about people losing jobs --- "yes barry it is unfortunate if city workers, school district workers, etc. lose jobs, but you and your colleagues inaction or bad reactions have contributed to people in private industry losing theirs or not being able to pay bills.

keep the faith. john again, great job of clearly digging out the facts.

warren gross

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