Distressed downtown St. George? A Republican boondoggle
Downtown St. George is “economically distressed.” So says the Governor’s Office of Economic Development.
How can this be? Boutique hotels and luxury mixed-use business and residential complexes are sprouting up. The rapidly-growing Dixie State University is constructing new buildings yearly to accommodate a burgeoning student population. New upscale student apartments ring the campus.
The city’s goal to revitalize downtown is being realized. In fact, Washington County tops the list of Utah counties with the most incoming investment per capita.
Chalk the “economically distressed” nonsense up to a new government boondoggle, this time courtesy of Republicans.
Intending that a new “Opportunity Zone” provision in its 2017 tax law would revitalize rural and distressed urban areas, the Republican-controlled Congress added this turkey to its otherwise commendable tax overhaul.
Democrats create anti-poverty programs that throw money at those they see as disadvantaged. Creative citizens always find ways to scam the government, so these programs do some good but inevitably fall well short and at great cost to taxpayers.
Republicans create tax breaks for entrepreneurs and investors to encourage them to help the disadvantaged. Creative citizens find ways to scam the government so these programs do some good but inevitably fall well short with a lot of lost tax revenue.
See the difference? Neither do I. Taxpayers lose either way.
The rhetoric supporting these new Opportunity Zones hits all the right notes. Tax incentives draw upgraded residential housing and new businesses to distressed areas. The new residents and employees spend money in nearby restaurants and services and the ripple effect magically improves life for all surrounding residents.
Opportunity Zone incentives to perform these miracles include deferring capital gains made on investments and the ability to sell a business tax-free after ten years.
It’s temptingly simple. Why didn’t I think of that?
Andrew Looney, director of the Brookings Institution’s Center on Regulation and Markets, explains why Republicans shouldn’t have thought of it in his skeptical analysis of the law: “Supporters say this will help revitalize distressed communities, but there is a risk that instead of helping residents of poor neighborhoods, the tax break will end up displacing them or simply provide benefits to developers investing in already-gentrifying areas.”
Gentrification is the process of higher-income folks moving into previously low-rent, urban neighborhoods.
Looney continues: “The value of the tax subsidy is ultimately dependent on rising property values, rising rents, and higher business profitability. That means a state’s Opportunity Zones could also serve as a subsidy for displacing local residents in favor of higher-income professionals and the businesses that cater to them — a subsidy for gentrification. “
Gentrification is exactly what is happening in downtown St. George’s opportunity zone. And it’s been happening in spades without giving developers an unneeded tax break.
To paraphrase a common aphorism, the “generals” in Congress were fighting the last war when they used the 2010 Census as the basis for determining opportunity zones.
Southern Utah is highly dependent on tourism and snowbirds. Taking a vacation or buying a second home was way down on the list for many during the great recession of 2009–10 when the census was taken. As a result, our unemployment rate was exceptionally high at that time.
Add to that unfortunate but transitory circumstance the fact that college students are counted where they attend, not at their family residences. Dixie State University is right in the middle of St. George’s opportunity zone, and students either have very low incomes or none at all during the academic year when they are counted.
Voilà! Downtown St. George is a “distressed” area loaded with low-income residents. We’re subsidizing local developers to do exactly what they were already doing in today’s booming economy.
Expect local officials to resume casting about for places to build subsidized low-income housing for those displaced by downtown gentrification. And expect the selected neighborhoods to object strenuously.
With pitifully few exceptions, whenever government targets specific “help” for the economy, it’s a “day late and a dollar short” — or more correctly, a dollar over. The hoped-for benefits are rarely achieved, and the cost is inevitably far greater than the original budget.
Expect exposés in coming years as developers find ways to use and abuse Opportunity Zones. And remember: You read it here first.
The viewpoints expressed above are those of the author and do not necessarily reflect those of The Independent.
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