How Louis Capano III solved his $10 million problem near Bethany Beach

By Xerxes Wilson and Maddy Lauria

For 30 years, the Capano family has had a $10 million problem in an exclusive community along the Atlantic Ocean north of Bethany Beach.

Tucked among dozens of multimillion-dollar beach homes first developed by the Capanos in the early 1990s sits a nearly 2-acre wetland where environmental regulations had for decades blocked construction of new homes.

 

But now, eight quarter-acre lots on top of the wetland within the Breakwater Beach neighborhood are being advertised for up to $1.35 million apiece without homes. Greenville developer Louis Capano III, who owns the property, has said in court filings that he now intends to market homes built on the lots.

One is already rising above the sawed-down marsh.

That became possible thanks to a unique and controversial solution to the environmental restrictions: a blacktop-on-wood cul-de-sac suspended on pilings above the restricted land.

The structure serves as both the road and driveways to yet-to-be-built homes, which also will be on pilings—a project with the potential to bring in $10 million, Capano has said in court filings.

 

“It is the first time I’ve seen anything of this nature,” said Ed Bonner, chief of the U.S. Army Corps of Engineers Philadelphia region regulation office, which is responsible for overseeing construction in most Mid-Atlantic waterways.

For the Capanos, the bridge opened the door to profit from the completion of the development.

For environmentalists, the bridge illustrates why Delaware officials shouldn’t rely on the federal government to protect local habitats.

Both sides agree it’s novel structure for Delaware.

‘Not typical, for sure’

A spokesman for Capano called the bridge a “creative, dynamic, and positive resolution to a long-standing impasse” that flowed from a “consensus approval of all stakeholders.” He said all appropriate regulators determined the bridge would allow for the development while “preserving the wetlands ecosystem.”

The bridge was completed in 2018 and construction of the first house on the land is underway.

The boardwalk is easily visible from Route 1. From the north lanes, it provides the backdrop to a large real estate sign displaying an aerial view of the yet-to-be-developed lots.

Sawdust from the construction site was sprinkled over the marshy area this week. Freshly cut tree stumps and mangled marsh grasses sat near shallow water.

Beneath the boardwalk roadway, which has been coated with blacktop, water sat still.

Bonner, with the Army Corps, said the bridge solution is unlikely to be repeated elsewhere given its cost, which court filings indicate was about $2 million.

“If you were dealing with a routine residential development this is far, far greater than what anyone can afford,” Bonner said. “This may be the only time you see something of this nature.”

The bridge has also been the subject of legal controversy in two Chancery Court filings against Capano.

One, filed by neighbors unhappy the bridge was being built in prime beach season in 2017, ended in what Capano and the president of the local homeowners’ association described as a cooperative settlement.

The other lawsuit was filed by Capano’s older cousin, Mario Capano, another prominent Delaware developer.

Mario Capano’s lawsuit claims he was responsible for initially securing the regulatory blessings for the bridge, and that the younger Capano has gone back on a deal to share the profits from the remaining development. In court filings, Louis Capano III has denied that a deal existed to share the profits.

His father, Louis Jr., and Mario Capano first acquired the land in 1987 with the purchase of 158 acres north of Bethany Beach for $20 million. At the time, The News Journal called it one of the most expensive beach-property transactions in Delaware history.

The developers recorded plans later that year with Sussex County to build the 49-lot Breakwater Beach subdivision, a gated community tucked between Coastal Highway and the Atlantic Ocean south of Indian River Inlet.

Today, some homes in the subdivision sell for north of $4 million and all but eight of the lots were developed and sold in the decade after the subdivision was created.

Those eight wooded lots sat vacant because the U.S. Army Corps of Engineers considered the land sensitive wetlands, both Louis Capanos have said in court affidavits.

 

‘Death by a thousand cuts’

Where Capano sees “ingenuity and cooperation,” though, environmentalists say the bridge represents a gap in local regulations showing how builders can profit off sensitive land.

This particular wetland is small and not influenced by the tides, so it receives no regulatory oversight from state or county officials.

The nearly 2-acre property is delineated on state and federal maps as an isolated, freshwater wetland, a natural feature that is capable of providing habitat to rare or endangered species and soaking up floodwaters from storms.

If this project had been proposed in Maryland, New Jersey or Pennsylvania, it may not have been allowed because those neighboring states have rules about developing on freshwater wetlands, Bonner said.

Delaware, with the exception of local regulations in New Castle County, does not.

“Freshwater wetlands in the state of Delaware are experiencing a death by a thousand cuts,” said Brenna Goggin, Director of Advocacy and External Affairs at the Delaware Nature Society. “What we’re lacking is the political will.”

Politicians and activists have discussed protections for such land several times since former Republican Gov. Michael Castle took office in the early 1990s, Goggin said. Over the years, legislation has been proposed, tabled and gone nowhere.

The most recent discussions are occurring on the county level in southern Delaware, a decade after county officials won a lawsuit against the state for trying to adopt stronger wetland protections.

There has been significant pushback from largely developers and landowners who don’t want to be told what to do on their own property, Goggin said.

“And we have yet to have the political will that looks at the long-term impact and value of these systems and weigh that against what our future will bring as far as sea level rise and climate change are concerned,” she said.

The First State does provide protections for tidal wetlands and nontidal wetlands that are 400 acres or more. But outside New Castle County, jurisdiction over small, nontidal wetlands like the one in Breakwater Beach generally falls to the federal Army Corps of Engineers.

 

Bonner said this bridge ultimately did not qualify for additional scrutiny from federal regulators.

“In this case, you are looking at an elevated structure. It is basically a bridge,” Bonner said. “The structures are not considered fill so there is no permit required.”

Had a significant amount of filling, like a traditional, ground-based roadbed and foundation, been sought on the land, the federal permitting process could have been triggered and the Capanos could have been asked to reconfigure or scale back plans to use the land, Bonner said.

Given that this Breakwater Beach wetland hurdle has existed for decades, it is unclear if federal regulators had previously ruled that Capano’s bridge concept needed further permitting scrutiny in the past.

Bonner said individual regulators’ interpretation over whether pilings constitute fill, and warrant greater permitting scrutiny by the corps, has evolved over the years as well.

A federal permit also would have triggered the state’s review of whether there were any rare or endangered species, like the Bethany Beach firefly or barking tree frog, on the site.

“If indeed these issues are important at a local level, take the initiative and implement zoning requirements and the land use requirements rather than relying on the federal government,” Bonner said.

Protections on the way?

That’s what some officials have been considering in Sussex County.

This year, a new group is continuing the discussion of whether more protections are needed for southern Delaware’s marshes, driven in part by Sussex County Councilman Irwin G. Burton.

“We have to look at what’s the resource, does it have value, and is it worth protecting,” said Burton, who said he is not familiar with this specific example.

“You have to have guidelines,” he said. “I’m not looking to shut everything down.”

Environmentalists still worry about the impact of development on Delaware’s remaining freshwater wetlands.

“Nontidal, freshwater wetlands are some of the most diverse habitats we have in Delaware,” said Jim White, Land and Biodiversity Management Fellow at the Delaware Nature Society and chairman of the state’s Native Species Commission. “What we have left is very important to protect. Some of our rarest plants and animals occur in these habitats.”

Adding a structure like the large boardwalk road — even if it’s a few feet above the marsh and plants — could potentially kill the wetland by cutting off sunlight, Goggin said.

“Any time that you manipulate Mother Nature, it has a variety of rebound effects,” she said. “If you want to continue to feel that ‘Oh-my-gosh, Dad, look there’s a bald eagle!’ moment, you have to protect the places where they have to live and get food. What’s that experience worth with your child or your grandchild?”

That’s not to mention whether emergency vehicles will be able to reach those residents in a time of need. Or what will happen during a large storm or as climate change continues to fuel faster rates of sea level rise, she said.

“Is that really where you should be putting people?” she said.

Parts of the Mid-Atlantic, including Delaware, are in a global hotspot for sea level rise, driven by melting ice in the Arctic as ocean temperatures increase from excess greenhouse gases in the atmosphere.

Here, sea level rise is climbing at a rate twice the global average. Studies have found that some wetlands will eventually drown and lose their ability to capture floodwaters during storms.

The last time Delaware environmental regulators completed an inventory of the state’s wetlands, they found more than 3,000 acres statewide had been lost.

 

The primary cause of the most recent losses? Residential development, according to the Department of Natural Resources and Environmental Control.

“We don’t know what’s been done, unfortunately, until it’s too late,” Goggin said.

About 25 percent of the state’s entire land area is considered some type of wetland. About 30,000 of those wetland acres — more than half — are freshwater wetlands with no local regulations to protect them, according to DNREC studies.

Susan Poole, president of that local homeowners association, said the bridge has caused neighbors some unrest. Regardless, she said it is unique, “like a piece of artwork.”

“The man owns the property; he has the right to develop it,” she said.


This article originally appeared in Delaware News Journal on April 26, 2019. You can read it here.