A dif­fer­ent view

Trump points to Op­por­tu­nity Zones to ar­gue he’s helped cities like Bal­ti­more. Res­i­dents dis­agree about who prof­its from the pro­gram.

Baltimore Sun Sunday - - FRONT PAGE - By Kevin Rec­tor And Chris­tine Con­don

Since the 2017 launch of the Trump-backed fed­eral “Op­por­tu­nity Zones” pro­gram to spur in­vest­ment in poor neigh­bor­hoods, Bal­ti­more has been a fo­cus of the dis­cus­sion — and for good rea­son. The post-in­dus­trial port city sits along the na­tion’s busiest trad­ing cor­ri­dor, poised for growth. It’s a city es­sen­tially built for a mil­lion peo­ple — its pop­u­la­tion peaked at about 950,000 in 1950 — but only has about 615,000 now. En­tire swaths of its east and west sides stand va­cant and ready for the sort of re­ha­bil­i­ta­tion en­vi­sioned by the fed­eral pro­gram, which pro­vides sub­stan­tial tax ben­e­fits for

in­vest­ment in dis­tressed ar­eas.

There’s a low cost of en­try for de­vel­op­ers here, and lots of an­chor in­sti­tu­tions — hospi­tals and uni­ver­si­ties, big em­ploy­ers and non­prof­its — that are com­mit­ted to stay­ing. All that makes the long-term in­vest­ments nec­es­sary un­der the fed­eral pro­gram a safer bet.

Be­fore Pres­i­dent Don­ald Trump be­gan blast­ing Bal­ti­more last month as “a dis­gust­ing, rat and ro­dent in­fested mess” where “no hu­man be­ing would want to live,” he had most re­cently spo­ken about the city and its prob­lems dur­ing

a White House event in De­cem­ber, where he praised Op­por­tu­nity Zones as a ma­jor part of his ad­min­is­tra­tion’s out­reach to dis­tressed, pre­dom­i­nantly black ur­ban com­mu­ni­ties.

“With Op­por­tu­nity Zones, we’re draw­ing in­vest­ment into ne­glected and un­der­served com­mu­ni­ties of Amer­ica so that all Amer­i­cans, re­gard­less of ZIP code, have ac­cess to the Amer­i­can dream,” Trump said at the time.

Amid his re­cent bar­rage, Trump said Democrats should thank him for cre­at­ing the Op­por­tu­nity Zones pro­gram.

In the past six months, Bal­ti­more has in­deed seen in­creased in­ter­est from in­vestors, ac­cord­ing to city of­fi­cials and oth­ers who have been track­ing the tax in­cen­tive’s im­pact.

“A lot of in­vestors are com­ing and say­ing, ‘We see po­ten­tial for sig­nif­i­cant growth in Bal­ti­more,’ ” said Ben Seigel, the Op­por­tu­nity Zones co­or­di­na­tor at the Bal­ti­more De­vel­op­ment Corp., the city’s eco­nomic de­vel­op­ment agency.

Yet some crit­i­cize the pro­gram, ob­ject­ing to what they call its trickle-down eco­nom­ics. They fault projects likely to push out, rather than lift up, ex­ist­ing neigh­bor­hood res­i­dents.

“The tax shel­ter is one that is re­ally very sus­cep­ti­ble for abuse, for pro­vid­ing sub­si­dies not so much for the os­ten­si­ble pur­pose [of pro­vid­ing] cap­i­tal to dis­tressed neigh­bor­hoods, but for the pur­pose of pro­vid­ing lu­cra­tive tax ben­e­fits to wealthy in­vestors,” said Bar­bara Sa­muels, manag­ing at­tor­ney for the ACLU of Mary­land’s Fair Hous­ing Pro­ject.

“It was never re­ally about in­vest­ment of cap­i­tal in poor neigh­bor­hoods . ... The fact that not much is go­ing to trickle down to the neigh­bor­hoods is a fea­ture, not a bug” of the in­cen­tive, which passed as part of the Repub­li­cans’ 2017 tax over­haul, Sa­muels said.

Seigel, who jok­ingly refers to him­self as “the Match.com of Op­por­tu­nity Zones” for his role in con­nect­ing in­vestors with po­ten­tial projects here, said lots of Bal­ti­more projects have in­cor­po­rated Op­por­tu­nity Zone in­vest­ments into their eco­nomic equa­tion for suc­cess in the past six months. He es­ti­mates up­ward of 50 projects across the city’s 42 zones are what he calls “in­vest­ment-ready,” if not shovel-ready.

The most prom­i­nent might be the Port Cov­ing­ton pro­ject in South Bal­ti­more, owned by Un­der Ar­mour founder Kevin Plank and New York in­vest­ment bank Gold­man Sachs. But in­vestors also have stepped for­ward with in­ter­est in neigh­bor­hood projects around Penn Sta­tion, where Amtrak has com­mit­ted to de­vel­op­ing its nearby prop­er­ties; the Perkins Homes in the Perkins Som­er­set Old Town neigh­bor­hood; and the old Madi­son Park North site along North Av­enue be­tween Bolton Hill and Reser­voir Hill.

Other projects are in “ac­tive con­ver­sa­tion” with in­ter­ested Op­por­tu­nity Zone in­vestors, in­clud­ing com­mer­cial prop­er­ties seek­ing ren­o­va­tions such as the 1100 Wi­comico Build­ing in Pig­town; rental hous­ing and mixed-use projects such as Wal­brook Mill in Cop­pin Heights; and mixed-use of­fice and com­mu­nity center projects such as the South­ern Streams Com­mu­nity Health and Well­ness Center in Broad­way East, ac­cord­ing to a roundup by the BDC.

In one of the city’s first Op­por­tu­nity Zone deals, Pru­den­tial Fi­nan­cial in­vested in the $150 mil­lion Yard 56 mixed-use pro­ject across from Johns Hop­kins Bayview Med­i­cal Center in East Bal­ti­more, not far from the boom­ing neigh­bor­hoods of Brew­ers Hill and Can­ton.

Across Bal­ti­more and at the state level, elected of­fi­cials have praised Op­por­tu­nity Zones as a needed boost for a city where in­vest­ment funds aren’t al­ways easy to come by, par­tic­u­larly in some of the neigh­bor­hoods where projects are pop­ping up.

Mary­land Gov. Larry Ho­gan and state law­mak­ers en­vi­sioned the Op­por­tu­nity Zones boost­ing big projects that had al­ready re­ceived other lo­cal, state and fed­eral in­cen­tives, help­ing to en­sure that profit mar­gins would make sense for long-term in­vest­ment.

The Repub­li­can gover­nor said as much in June to a room filled with vis­it­ing of­fi­cials from other states at a na­tional sum­mit on Op­por­tu­nity Zones in An­napo­lis, where he shared his ad­min­is­tra­tion’s goal to make Mary­land’s 149 zones the “most com­pet­i­tive ones in Amer­ica.”

“The fact is that pro­vid­ing fed­eral cap­i­tal gains tax in­cen­tives is a great start, but it may not be enough to en­sure the re­vi­tal­iza­tion of th­ese neigh­bor­hoods,” said Ho­gan, ac­cord­ing to pre­pared re­marks from the closed-door Na­tional Gov­er­nors As­so­ci­a­tion event. “So we set out to do ev­ery­thing in our power to uti­lize new and ex­ist­ing state and fed­eral pro­grams, grants and fund­ing sources, and to have all our state agen­cies work col­lab­o­ra­tively with our county and mu­nic­i­pal gov­ern­ments and the pri­vate sec­tor to supercharg­e our op­por­tu­nity zone re­vi­tal­iza­tion.”

The Op­por­tu­nity Zones pro­gram al­lows in­vestors to use prof­its from an­other in­vest­ment to re-in­vest in real es­tate or busi­nesses in the des­ig­nated zones; in do­ing so, they can de­fer and re­duce their cap­i­tal gains tax on the ini­tial prof­its. And any prof­its from the Op­por­tu­nity Zone in­vest­ment are tax-free as long as it is held for 10 years.

Some see the pro­gram as more a handout for the rich than a wind­fall for poor ar­eas, as sup­port­ers have pitched it.

In one neigh­bor­hood put up for the pro­gram by the city but left out by Ho­gan, the skep­ti­cism is so strong that some res­i­dents ex­pressed re­lief at be­ing left out.

Aisha Pew, one of the own­ers of the Dove­cote Cafe in Reser­voir Hill, said she is “ac­tu­ally thank­ful” that her neigh­bor­hood didn’t get des­ig­nated as an Op­por­tu­nity Zone. If it had, she said, she feared more peo­ple would start “pay­ing at­ten­tion to Reser­voir Hill in a more preda­tory way.”

Black-owned busi­nesses can cre­ate fi­nan­cial op­por­tu­nity and build up neigh­bor­hoods on their own, as they have in Reser­voir Hill, Pew said, and shouldn’t wait for out­side in­vestors.

“We’re not look­ing to gen­trify,” agreed Miriam Burg, whose fam­ily moved to Reser­voir Hill in 2000. “We’re look­ing to lift the whole neigh­bor­hood up. We don’t want this to be­come like the other neigh­bor­hoods that have just flipped.”

Fears of in­equities un­der the pro­gram were ex­ac­er­bated af­ter The Bal­ti­more Sun and ProPublica pub­lished an ar­ti­cle, on the same morn­ing as Ho­gan’s speech at the An­napo­lis sum­mit, out­lin­ing how the gover­nor had agreed to in­clude Port Cov­ing­ton in the state’s list of el­i­gi­ble prop­er­ties.

Plank’s old rail­road site on the Pat­ap­sco River’s Mid­dle Branch in Bal­ti­more al­ready has more than $300 mil­lion in pri­vate in­vest­ment and is el­i­gi­ble for $1.4 bil­lion more in pub­lic sup­port, in­clud­ing in­fra­struc­ture bonds un­der a hard-fought tax deal with the city. Now, the pro­ject had qual­i­fied for the Op­por­tu­nity Zone tax breaks on what seemed like a tech­ni­cal­ity.

While it lacked the tra­di­tional poverty in­di­ca­tors of qual­i­fy­ing tracts, Port Cov­ing­ton was deemed el­i­gi­ble as an Op­por­tu­nity Zone on fed­eral maps be­cause a sliver of its land over­lapped with a pre­vi­ously des­ig­nated in­vest­ment area.

Crit­ics saw the gover­nor’s in­clu­sion of the prop­erty as pos­si­bly tak­ing the same op­por­tu­nity from some other down­trod­den tract.

Ryan Dorsey, a pro­gres­sive voice on the all-Demo­cratic Bal­ti­more City Coun­cil, said Port Cov­ing­ton al­ready re­ceived a large tax deal from the city while pro­vid­ing lit­tle ben­e­fit for most res­i­dents.

“The eq­uity anal­y­sis that I know on Port Cov­ing­ton is that it’s go­ing to ben­e­fit high-in­come white peo­ple, and to the ex­clu­sion of low-in­come peo­ple and black peo­ple,” Dorsey said. “Adding more pub­lic sup­port into that with an Op­por­tu­nity Zone is re­ally a slap in the face to all the rest of the com­mu­ni­ties in the city that aren’t get­ting that sup­port.”

Dorsey called claims that the Port Cov­ing­ton pro­ject will ben­e­fit the en­tire city dis­hon­est, de­spite its back­ers hav­ing agreed to a com­mu­nity ben­e­fits agree­ment with sur­round­ing neigh­bor­hoods worth tens of mil­lions of dol­lars. The fact that the pro­gram is backed by Trump re­veals its true in­tent to make rich in­vestors richer, he said.

“What for a long time has seemed ill-de­fined is, What is an Op­por­tu­nity Zone? Who is go­ing to get them? How is that de­ci­sion go­ing to be made?” Dorsey said. “So it’s not sur­pris­ing that ... ‘Op­por­tu­nity Zone’ is com­ing to be de­fined here as some­thing that is go­ing to ben­e­fit a high-in­come white group that ex­cludes low-in­come black peo­ple.”

Many oth­ers — in­clud­ing Ho­gan and Port Cov­ing­ton of­fi­cials — de­fend the Op­por­tu­nity Zone pro­gram broadly and the Port Cov­ing­ton des­ig­na­tion specif­i­cally, say­ing both will help Bal­ti­more.

“We make no apolo­gies for work­ing hard to en­sure Bal­ti­more gets its fair share from the fed­eral govern­ment,” said Marc Weller, who is lead­ing Port Cov­ing­ton’s de­vel­op­ment. “We will keep ad­vo­cat­ing for ev­ery av­enue avail­able to drive more in­vest­ment to the city.”

Port Cov­ing­ton ex­ec­u­tives called the sug­ges­tion that they were given spe­cial ac­cess to the in­cen­tive wrong. They said they did not even know, un­til the ProPublica story ran, that their prop­erty qual­i­fied as an Op­por­tu­nity Zone based solely on a tiny over­lap in Trea­sury De­part­ment maps.

“The Port Cov­ing­ton de­vel­op­ment is be­ing built on land that was, un­til very re­cently, a mostly aban­doned and con­tam­i­nated in­dus­trial waste­land,” Weller said.

The Trea­sury De­part­ment, which did not in­clude Port Cov­ing­ton on a first list of qual­i­fied tracts, did not re­spond to ques­tions about its re­vised list. It pre­vi­ously said it left some tracts off the first list in er­ror.

Mike Ricci, a Ho­gan spokesman, said the gover­nor’s of­fice fol­lowed the rules for in­clud­ing Mary­land tracts in the fed­eral pro­gram, and be­lieves Port Cov­ing­ton will ben­e­fit the city at large. Ho­gan also in­cluded two Sand­town-Winch­ester tracts in West Bal­ti­more the city had not sug­gested.

He left out other tracts rec­om­mended by city of­fi­cials in Up­ton, Reser­voir Hill and Brook­lyn, Ricci said, be­cause he be­lieves that Op­por­tu­nity Zones “are gen­er­ally less op­ti­mal in dense res­i­den­tial ar­eas, where it would re­quire more de­mo­li­tion and dis­rup­tion to the com­mu­nity.”

Some res­i­dents agreed with that de­ci­sion; oth­ers dis­agreed.

Diane Ingram, pres­i­dent of Con­cerned Cit­i­zens for a Bet­ter Brook­lyn, said she sup­ports the des­ig­na­tion for Port Cov­ing­ton but be­lieves the Brook­lyn tract should not have been left out, as there are clus­ters of rowhomes and other pock­ets ripe for re­de­vel­op­ment.

The ACLU’s Sa­muels said that to the ex­tent in­vest­ments are be­ing made in poorer neigh­bor­hoods, the pro­gram has largely been lim­ited to hous­ing and not for the sort of eco­nomic de­vel­op­ment, such as gro­cery stores and banks and small busi­nesses that of­fer lo­cal res­i­dents jobs, that could have the big­gest im­pact.

It’s un­clear ex­actly how big a wind­fall the des­ig­na­tion will be for Port Cov­ing­ton and its back­ers. While Plank and Gold­man Sachs don’t stand to ben­e­fit from the tax break on their ex­ist­ing in­vest­ments, any new in­vest­ment in the pro­ject could ben­e­fit from the in­cen­tive.

Some Op­por­tu­nity Zone ex­perts said the in­clu­sion of Port Cov­ing­ton, and the sites of other projects that ap­pear well on their way to re­de­vel­op­ment al­ready, made per­fect sense in th­ese early stages of the fed­eral pro­gram.

Mary­land’s in­clu­sion of shovel-ready tracts with oth­ers in parts of the city where the in­vest­ment out­look is more dim is in line with na­tional trends, said Colin Hig­gins, pro­gram di­rec­tor at The Gov­er­nance Pro­ject, a non­profit work­ing with mu­nic­i­pal­i­ties to max­i­mize the pro­gram’s ben­e­fits. Hig­gins re­cently toured Bal­ti­more’s zones with Seigel.

“A lot of the states were re­ally thought­ful and in­ten­tional about how they des­ig­nated their zones, and a lot of them by de­sign des­ig­nated a mix” of projects in vary­ing stages of de­vel­op­ment, Hig­gins said.

The Rev. Donte Hick­man was one of the first peo­ple in Bal­ti­more to boost the Trump-backed plan. At one point, Trump was even sched­uled to visit Hick­man’s East Bal­ti­more church to dis­cuss the pro­gram, be­fore de­cid­ing to host the late-De­cem­ber White House event that Hick­man at­tended in­stead.

Hick­man un­der­stands the ran­cor over Port Cov­ing­ton’s in­clu­sion and the fear that “the wealthy are get­ting the ben­e­fit” of the pro­gram, he said. But he sees no prob­lem with it, as long as the in­vest­ment doesn’t stop there.

“If it’s eas­ier to start at Port Cov­ing­ton first, it doesn’t mat­ter to us,” Hick­man said. “What does mat­ter is that we as a city don’t re­main hi­jacked of po­ten­tial, but that there is some real [in­ten­tion to move] that po­ten­tial to other city neigh­bor­hoods.”

Seigel said his of­fice has been work­ing hard to en­sure that the ben­e­fits of the pro­gram are spread across the city. And he said he ex­pects a lot more in­vest­ment to ar­rive be­tween now and the end of the year, when pro­vi­sions of the tax law pro­vide for the great­est cap­i­tal gains re­duc­tions for in­vestors.

“There is a sense of ur­gency in the in­dus­try right now, es­pe­cially among larger in­vestors,” Seigel said.

KEVIN RICHARD­SON/BAL­TI­MORE SUN

Aisha Pew, owner of Dove­cote in Reser­voir Hill, sees the many growth op­por­tu­ni­ties for peo­ple of color in the area.

KEVIN RICHARD­SON/BAL­TI­MORE SUN PHO­TOS

Miriam Burg, left, along with her daugh­ter El­lie, talks about the di­ver­sity in the Reser­voir Hill neigh­bor­hood.

Peter Driscoll talks about Reser­voir Hill and the op­por­tu­ni­ties for growth.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.