Southold to consider Mattituck hotel proposal during moratorium

The Town of Southold will review plans for an 81-room hotel in Mattituck after the developers won an exemption from a moratorium on building new hotels. 

Developer D’Wayne Prieto is working with Mattituck developer Alan Cardinale, who owns the 12-acre site, to redevelop the property. The abandoned building, formerly a Capital One bank office, would be converted into an 81-room hotel with space for a restaurant, catering hall and employee housing.

The waiver grants relief from the town’s hotel moratorium, allowing for a site plan review to take place. Final approvals must be granted by the town’s planning board.

The board voted 6-0 to approve the waiver on July 8, citing the property’s commercial zoning and proposed reuse of the existing 77,000-square-foot building.

The town imposed several conditions as part of the waiver, including setting the maximum number of rooms at 81 and prohibiting the developers from seeking tax abatements from the Suffolk County Industrial Development Agency.

“I commend the board for their decision and wisdom in preserving and increasing the town's tax revenue,” Prieto told Newsday in a text message. “It has been a long five years to reach this point.”

Zoning update underway

First proposed in 2019 as a 121-room resort with a spa and indoor water park, plans were scaled back in response to community opposition and further stalled by the town’s moratorium, which took effect in June 2024. Southold lawmakers recently voted to extend the moratorium another year, buying time to complete a townwide zoning update. The volume of short-term vacation rentals also has factored into the discussion as officials try to strike a balance between promoting tourism and preserving affordable housing.

A town task force report found there were more than 1,000 short term rentals across Southold. Of those, assistant town attorney Ben Johnson said between 400 and 500 are operating illegally, either without a permit or renting for fewer than 14 days. The town is spending $20,000 on new software, Rentalscape, to track illegal rentals and step up enforcement, Johnson said in an interview.

The property’s zoning was a key consideration in the approval. Both the current and proposed rezoning plans allow hotels. According to the town’s moratorium, existing resorts, hotels and motels seeking expansions are exempt.

Southold councilman Greg Doroski said before the vote that tax breaks have “real impacts on our schools and our fire departments.”

“This applicant's willingness to pledge not to seek that sort of abatement is really significant,” Doroski said.

The developers argued the project has benefits since it would generate taxes for the town and revitalize a long vacant structure. The building has sat empty since Capital One closed in 2011.

Several residents and environmental groups spoke out against the proposal during the meeting, saying hotels would generate traffic and negatively affect water quality.

Lawsuits underway

Two hotels operating in Southold are suing the town after their expansion plans were stymied.

In May, the owners of Hotel Moraine in Greenport filed filed a lawsuit in May after the zoning board of appeals rejected their bid to add 14 rooms to the property. In court documents, the owners said they should not have had to seek a variance from that board because they conformed with prior land use rulings and the denial was "illegal, arbitrary and capricious” and an “abuse of discretion.”

Attorney Daniel Pennessi, who owns Hotel Moraine, declined to comment on the filing Friday.

Silver Sands Motel in Greenport is also suing the town to challenge a “conditional approval” the planning board set for renovations.

That approval, the suit alleges, requires Silver Sands to complete specific construction work in order to obtain a final approval. But at the same time, the suit points out, it prohibits the building department from issuing crucial permits until the final approval is secured. The suit “seeks to rectify this impossible Catch-22,” court filings show.

“This pushback comes against the backdrop of the Town’s recent efforts to clamp down on hospitality development,” attorneys for Silver Sands wrote in court documents.

Gayle Pollack, an attorney representing Silver Sands from Morrison Cohen LLP in Manhattan, did not respond to a request for comment on Friday.

Southold Town Attorney Paul DeChance said he expects the Silver Sands issue to be resolved but declined to talk specifically about both lawsuits.

“[The town board] did everything they could to not hamper or frustrate an existing business,” DeChance said in an interview.