To give President Donald Trump and congressional Republicans the benefit of the doubt, the "opportunity zones'' created in the 2017 tax-cut legislation are intended to lure private investment into urban communities that need a boost. Yet too often, it appears the benefits are flowing to well-connected wealthy investors for projects in neighborhoods that don’t need the help. Better screening up front and better public reporting afterward would prevent these lucrative tax breaks from being exploited.
One prime example of abuse: The son of the Waste Management and Blockbuster video billionaire Wayne Huizenga Sr. plans to build luxury apartment towers next to a marina for superyachts in West Palm Beach -- which just happens to be in an opportunity zone. And as ProPublica reported, the site just happened to be designated an opportunity zone after Huizenga’s son appealed to then-Gov. Rick Scott, who had not originally planned to include the site on the state list submitted to the Trump administration for rubber-stamp approval. Funny how that worked.
Opportunity zones initially received little attention in the 2017 tax-cut legislation as scrutiny was aimed at reductions in the corporate income tax rate and individual tax rate cuts that primarily benefited the wealthiest Americans. The zones offer several incentives to wealthy investors. If they invest in projects the capital gains from the sale of stocks, for example, they can defer the capital gains tax on that money for up to seven years and get a tax break. Any appreciation on the new investment in the opportunity zone is tax free after 10 years if the project is sold. The Treasury Department chose a list of census tracts eligible to become opportunity zones based on poverty measures, and governors picked one-quarter of the tracts in their states. On its face, the concept offers promise for helping communities that need it.
In practice, it’s too often been a different story. The New York Times reported in August that the opportunity zone tax breaks are set to be used to help finance a fancy hotel in a trendy section of New Orleans, a 46-story apartment tower in a Houston neighborhood that doesn’t need help and a new office tower in Miami’s trendy Design District. There is no need to subsidize private development in areas that are doing fine on their own.
Then there are the political calculations in the opportunity zone designations. In Florida, as ProPublica reported, Scott’s selections benefit three other wealthy contributors to his political efforts: Tampa Bay Lightning owner Jeff Vinik; Jorge Perez, a South Florida condo king; and Stephen Ross, a prominent Trump fundraiser and owner of the Miami Dolphins. Scott calls the questions about the political connections "ridiculous,'' but they are legitimate.
Of course, some of the criticism of opportunity zones is easier from the outside looking in. The opportunity zone tied to Vinik’s Water Street development in downtown Tampa covers blocks that were vacant for years. (Vinik is part of FBN Partners, a group of local investors who have loaned $15 million to Times Publishing Co., which owns the Tampa Bay Times.) The Ybor City zone covers land that is dominated by warehouses and could be a site for a new Tampa Bay Rays stadium. In Pinellas County, there are 16 opportunity zones -- including the Tropicana Field site that is ripe for redevelopment.
As always, the details in tax policy matter. Opportunity zones are a reasonable concept. Unfortunately, there was too much room for political maneuvering at the front end and no public accountability on the back end. Congress should pass legislation that at least would require public reporting of the value of the tax breaks in each opportunity zone and the public benefit.
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Editorials are the institutional voice of the Tampa Bay Times. The members of the Editorial Board are Times Chairman and CEO Paul Tash, Editor of Editorials Tim Nickens, and editorial writers Elizabeth Djinis, John Hill and Jim Verhulst. Follow @TBTimes_Opinion on Twitter for more opinion news.