by William Skink
As residents in Missoula’s largest homeless camp (there are several) move to higher ground to avoid the flood waters sweeping away the heaping trash accumulated after last summer’s cleanup, a new gentrification tool is being trotted out as an enticing new incentive aimed at luring private sector investment in low-income “opportunity zones”. From the link:
Tucked away in the federal tax overhaul legislation last year was a provision that could allow investors to receive a tax break in exchange for spending money in low-income areas. Missoula officials have nominated an area that includes most of the West Broadway corridor and the Northside neighborhood.
The Tax Cuts and Jobs Act included a program called “Opportunity Zones” that provides an incentive for people to reinvest capital gains into low-income areas and thereby avoid the capital gains tax.
The tax benefits include a temporary deferral of inclusion in the taxable income for capital gains reinvested. There is also a permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in an Opportunity Fund if the investment is held for at least 10 years, along with other benefits.
Sounds great, right? I’m sure this little nugget in the tax cut bill won’t be criticized by Missoula’s liberal political leadership because it provides another “opportunity” to cloak gentrification with euphemistic language about helping low-income neighborhoods.
Maybe the recent sell-out of Southgate Mall by the Lambros clan for a cool 58 million is coloring my perspective. They received millions in tax increment financing, then flipped it, making bank. Despite how badly the optics are, the head of the Missoula Redevelopment Agency is not worried at all about using public financing to sweeten a real estate deal for Lambros:
The Missoula Redevelopment Agency ultimately awarded the project nearly $7 million in TIF financing. Little did MRA director Ellen Buchanan know that the project, leveraged with public support, would be used to help sell the mall before the paint on renovations is even dry. A new dine-in theater opened at Southgate two weeks ago, and a Lucky’s Market grocery store will open later this year.
But Buchanan isn’t concerned that the city helped flip a mall. She’s excited. “I think it’s a win-win,” she says.
So, with this attitude from a leading city agency directing public funds for redevelopment, I’m not very confident that anything will be put in place to ensure development using this tax incentive won’t result in gentrification, displacing the low-income people who make designating opportunity zones possible.
Here’s more from the first link:
“Opportunity Zones offer favorable capital gains treatment for taxpayers who invest in designated high-poverty neighborhoods,” said Adam Looney, a senior fellow of economic studies at the Urban-Brookings Tax Policy Center in a report on the new legislation.
“Invest in real estate or businesses located in a qualified zone, hold it for 10 years, and not only can you sell your investments free of capital gains tax, but you also get a tax break on un-taxed capital gains rolled into an Opportunity Zone investment.”
He said that individuals in a high-tax state and with short-term capital gains can avoid $7.50 in taxes for each $100 they invest, even before considering any return on their Zone investments.
“It’s very favorable treatment,” he said.
But Looney also warned that the program could amount to a “tax cut for gentrification” by providing benefits to developers investing in already-gentrifying areas, thereby displacing residents of poor neighborhoods.
West Broadway features some of the only housing that people with significant barriers to conventional rentals can access. The Sleepy Inn and Colonial apartments, specifically, are last-ditch housing options for violent and sexual offenders. They also look nasty and run down, so I bet those prime pieces of property will be some of the first to be targeted for redevelopment. With the constant uncertainty of the Russell Bridge project finally alleviated, the time for investment is quickly approaching.
Where will these people go? If they are on probation or parole, they can’t leave the city. And trailer parks are also being shuttered. And these people aren’t sexy to advocate for like foreign refugees are.
If there are not clear conditions placed on what it means to develop a low-income neighborhood in a manner that will actually benefit the people living there, and not displace them, then these “opportunity zones” will simply be another euphemism for gentrification.
And if past behavior is a good predictor of future behavior, people like Ellen Buchanan and agencies like MRA won’t give two shits if the development they promote (and prime with public money) transforms this area into another gentrified zone that will ultimately exclude the very people whose poverty made the investment possible in the first place.