NO YELLOW BRICK ROAD IN SCOTT'S LAND OF OZ
Amid a blizzard of whoppers coming from Donald Trump, his oft-repeated claim that he did more for Black Americans than any President, "maybe even Lincoln," deserves a special medal for egregiousness.
Trump boasted this in connection with Senator Tim Scott's pet project: Opportunity Zones, which were slipped into the 2017 Tax Cuts and Jobs Act. These OZs were supposed to lure capital to marginalized neighborhoods, create jobs, and rebuild communities. The magic funds for these investments would come from wealthy individuals seeking to avoid capital gains taxes. (For the back story, see my previous post, "Tim Scott's Wet Kiss to the Wealthy" at this site.)
Scott claims that OZs are going to significantly improve conditions in minority neighborhoods (as well as parts of rural America). On this promise rests Trump's nonsensical claim that he is the Abe Lincoln for Black America.
For a time, Pastor Donte Hickman of East Baltimore's South Baptist Church believed Trump. He praised the OZ concept at a White House press conference in 2018. Hickman told the PBS News Hour, "We just purchased [a] building. We're going to completely gut it and renovate it and turn it into a work force center where we will have a barber training school, we will have a demolition training school, CVS pharmaceutical training."
Hickman thought his $32 million project was a natural candidate for OZ funding. This seemed to be precisely the type of community-building project Scott intended to finance with the legislation. But no.
We have met with all kinds of investors," he told Paul Solman of PBS News Hour. "All came with the terminology, opportunity, mission-driven projects. But the mission was all about how much they could make out of a project. Can we get our 10 percent to 12 percent? But when it turned out that the project could not yield the kind of [financial return] that they wanted, then there was no opportunity for us, and there was no interest from them."
Pastor Hickman's experience is not the story Tim Scott tells, or wants voters to know. With a few exceptions, the OZ program has proven to be yet another tax shelter for the rich with little corresponding public benefit.
David Wessel put the OZ program into perspective in a column for The New York Times on October 12, 2021. While it is true, Wessel wrote, that a few promising OZ investments have been made in downtown Erie, Pennsylvania and into affordable housing in South Los Angeles, "a lot more of it is going to projects like a Ritz-Carlton hotel and condo complex in downtown Portland, Ore., and a Virgin Hotel in New Orleans." He notes that luxury student housing attracts OZ investors because college students show up in census tracts as "poor" people.
In South Carolina, at least eleven funds are pitching OZ opportunities to investors with capital gains to shield. One is the Smart Economic Development Fund of South Carolina Opportunity Fund, which is minority owned. It is seeking $100 million, with a minimum investment of $50,000.
Its first announced project is The Boulevard at Claflin University in Orangeburg. It's a student housing and research center that was slated to open in August of 2021. Besides providing housing for graduate students, it would contain research facilities to identify medicinal uses for hemp. But ground has not yet been broken. When I called the fund's listed number on its website, it was no longer working.
Another disappointment has been what South Carolina State Agriculture Commissioner Hugh Weathers called "the Boeing of agriculture." Located in a rural Hampton County Opportunity Zone, this is a $314 million project on a 1000-acre site for the growing, packing and shipping of produce within 24 hours of harvest.
This project is supposed to open in late 2022, but so far only one building has been constructed, and it is not operational, according to the South Carolina news site The Nerve.
If Scott is serious about the potential for OZs to revolutionize investing in low income census tracts, then instead of patting himself on the back, he ought to fix the program by addressing the following problems:
First, it must become easier to invest in small businesses, not in hotels, self-storage facilities, student housing, and other projects that will be built anyway, without OZ money. At present, the program throws up too many roadblocks to make small business investment worth the undertaking.
Second, the law requires no measure of impact on communities. Investors are not rewarded for the number of jobs created or buildings rehabilitated. They are rewarded only by the percentage return on their investment. That is not a recipe for success in low income areas.
Third, the IRS, or some other federal agency, should be empowered to collect data on all OZ investments so that the public knows the costs and the benefits from this tax loophole.
President Biden has expressed skepticism about the value of this program. Scott (the self-styled Mr. Bi-Partisan) ought to trot up to the White House and work with Biden and Congress to fix it. So far, there is no sign he is interested in that. It's easier for him to claim success as he campaigns for re-election than to actually make the land of OZ real.
Ben Carson, Trump's clueless Secretary of Housing and Urban Development, was challenged in August of 2019 about the value of OZs. "Some people have complained...this is just a mechanism for rich people to get richer," he said. "Um, news flash, rich people are going to get richer anyway."
That seems to sum up both the Trump era and Scott's OZ program. Scott's record shows he is just fine with that.