Badger InstituteBadger Institute
  • Home
  • Issues
    • Taxes
    • Education
    • Crime & Justice
    • Spending & Accountability
    • Economy & Infrastructure
    • Licensing
    • Healthcare
    • Civil Society
  • Mandate for Madison
  • Research
  • Magazines
    • Diggings
    • Wisconsin Interest
  • Events
  • Media
    • Podcast
    • Fact Sheets
    • Viewpoints
    • Press Releases
    • Badger in the News
    • Video
    • Audio
    • Testimony
  • About
    • Our Mission
    • Board of Directors
    • Team
    • Visiting Fellows
    • America’s Future
    • Careers
  • Newsletter
  • Donate
  • Contact Us

Subscribe for Updates

Get the latest news and updates from Badger Institute.

What's New

Wisconsin lawmakers in the dark on broadband

March 16, 2023

The underfunded part of Wisconsin public schooling

March 16, 2023

If we don’t pay for roads, we don’t get mobility

March 9, 2023
Facebook Twitter YouTube LinkedIn Instagram
TRENDING:
  • Wisconsin lawmakers in the dark on broadband
  • The underfunded part of Wisconsin public schooling
  • If we don’t pay for roads, we don’t get mobility
  • Assembly Speaker calls for tolling to fund Wisconsin infrastructure
  • Foreseeing the Future of Wisconsin’s Flat Tax
  • Wisconsin voters will be asked about welfare work requirements
  • A state without convictions
  • Why Wisconsin Needs a Flat Tax and Education Reform
  • Donate
  • Newsletter
  • Contact
Facebook Twitter YouTube LinkedIn Instagram
Badger InstituteBadger Institute
SUPPORT OUR MISSION
  • Issues
    • Taxes
    • Education
    • Crime & Justice
    • Spending & Accountability
    • Economy & Infrastructure
    • Licensing
    • Healthcare
    • Civil Society
  • Mandate for Madison
  • Research
  • Magazines
    • Diggings
    • Wisconsin Interest
  • Events
  • Media
    • Podcast
    • Fact Sheets
    • Viewpoints
    • Press Releases
    • Badger in the News
    • Video
    • Audio
    • Testimony
  • About
    • Our Mission
    • Board of Directors
    • Team
    • Visiting Fellows
    • America’s Future
    • Careers
Facebook Twitter YouTube LinkedIn
DONATE
Badger InstituteBadger Institute
Home » Opportunity Zones stray from original intent
Economic Development

Opportunity Zones stray from original intent

By Ken WysockyOctober 15, 2019
Share
Facebook Twitter LinkedIn Pinterest

Rich people shouldn’t be the beneficiaries’ of a federal program that gives investors tax breaks to help disadvantaged areas, critics say

Census tract number 55079011300 on the north side of downtown Milwaukee doesn’t look like a disadvantaged area in need of urgent economic stimulus. Nonetheless, the tract is one of 120 statewide — and 34 in the city of Milwaukee — designated as a so-called Opportunity Zone.

The case for calling this tract economically distressed is not very compelling. Its median household income is a shade north of $43,000, roughly 10% more than the median income for Milwaukee residents overall. The median value of owner-occupied housing units is $210,100, compared to $115,800 citywide, according to the U.S. Census Bureau. And the poverty rate in the tract is 21%, barely above the 20% qualification threshold, census data show.

Moreover, the tract — a triangular-shaped parcel bounded by the Milwaukee River on the northwest, North Van Buren Street on the east and East Juneau Avenue on the south — hosts a variety of newer upscale housing complexes, including The North End, the Avenir, Rhythm and The Flatiron.

In addition, the recently approved Convent Hill South mixed-income apartment complex, a 32-story high-rise, will stand within the tract on a prime piece of downtown real estate at 1325 N. Jefferson St. Travaux Inc., the project’s developer, says the Opportunity Zone program will be an important funding source.

The tract also includes a swath of the Milwaukee School of Engineering campus, restaurants, taverns and many other businesses. In fact, websites for apartment and condo complexes in the area tout the neighborhood’s rich variety of art galleries, restaurants, pubs and numerous other amenities.

Yet the tract still meets the criteria for Opportunity Zone financing. This flagrant disparity between the distressed designation and economic reality vividly illustrates one of the problems with this federal program, which is coming under increasing criticism and scrutiny since it was enacted as part of the income tax code overhaul passed by Congress in 2017.

The goal of the zones is simple: Encourage investment in low-income, underserved urban areas by providing investors with tax breaks if they pump unrealized capital gains into special opportunity funds. The private-sector funds then must inject at least 90% of their capital into the more than 8,700 Opportunity Zones established nationwide, theoretically boosting disadvantaged areas.

The program aims to tap into an estimated $6 trillion in unrealized capital gains held by American households and corporations. But as The New York Times, The Wall Street Journal and several public policy think tanks point out, the program doesn’t always benefit the people it’s designed to help.

Criteria too broad

How does this happen? Part of the problem is the overly broad zone criteria, which allows census tracts to qualify even if they’re not truly economically distressed. Furthermore, there aren’t any requirements regarding what kinds of projects must be built in the zones, critics note.

As such, this has led to construction of upscale hotels, apartments, office towers and the like instead of projects that benefit low-income residents, says Stan Veuger, an economist for the Washington, D.C.-based American Enterprise Institute, a public policy think tank.

“You can look at the criteria and tell that a lot of people will benefit from this program that don’t need federal support,” he says. “If you’re going to try to present it as a poverty-prevention program, rich people shouldn’t be the beneficiaries.

“A lot of the tax benefit goes toward infra-marginal projects that would happen regardless” of Opportunity Zone incentives, he adds. “That’s exactly what people critical of the program warned about.”

The head of a local government watchdog group agrees. Chris Kliesmet, executive administrator of CRG Advocates (Citizens for Responsible Government), says there are census tracts in impoverished areas of Milwaukee that need more help than the one downtown.

“This area already is doing very well,” he says, pointing to the tract’s thriving, high-end housing and businesses. “Go on Google maps and look at all the businesses there. … Sanford is smack dab in the middle of this tract,” he says, referring to one of Milwaukee’s premier upscale restaurants.

Furthermore, the gentrification of these designated census tracts eventually will raise housing costs, which theoretically will displace the same low-income residents the program is designed to assist, experts observe.

So how were the Opportunity Zones in Milwaukee selected anyway?

First, city officials submitted a list of 165 qualified census tracts to then-Gov. Scott Walker. In turn, he relied on guidance from the Wisconsin Housing and Economic Development Authority (WHEDA) to determine which census tracts to designate. Governors were given authority to designate up to 25% of their states’ qualified census tracts as zones.

“How Governor Walker narrowed that list was not shared with us,” Jeff Fleming, a spokesman for the city’s Department of City Development, wrote in an email.

When specifically asked why WHEDA designated census tract number 55079011300 as an Opportunity Zone, a spokesperson emailed a reporter a copy of a March 2018 letter to Walker from William Martin, then the business and community engagement director for WHEDA. The letter listed all of the zones selected and the criteria and methodology used to make the zone determinations.

“WHEDA worked with internal and external analysts to evaluate all 479 potentially qualifying census tracts in Wisconsin,” the letter states. “The analysis took into account a wide array of factors that not only considered economic distress, but also the prior history of attracting public-private economic development and access to the infrastructure and other assets that can increase an area’s ability to attract and sustain future economic development.”

Ken Wysocky of Whitefish Bay is a freelance journalist and editor.

Related stories:
► Government’s unfair housing foray
► A Housing Authority subsidiary with a social mission
► The perils of state-run retirement plans
► No need for state-run student loan refinancing

Share. Facebook Twitter Pinterest LinkedIn Tumblr Telegram Email
Ken Wysocky

Related Posts

Assembly Speaker calls for tolling to fund Wisconsin infrastructure

March 2, 2023

Foreseeing the Future of Wisconsin’s Flat Tax

March 2, 2023

Another Reason, Governor, to Cut Those Top Tax Rates

February 20, 2023
Categories
Top Posts

Local pols filling old budget holes with massive COVID aid

December 8, 20221,449

This is not four years ago

November 10, 20221,287

A state without convictions

January 12, 2023644

Billions in federal spending in Wisconsin unaudited; results never measured

November 9, 2022488
Archives

Sign Up for Top Picks

Our weekly e-Newsletter with the latest items and updates

Connect with Badger Institute
  • Facebook
  • Twitter
  • YouTube
  • LinkedIn
About Us
About Us

The Badger Institute is a nonpartisan, not-for-profit institute established in 1987 working to engage and energize Wisconsinites and others in discussions and timely action on key public policy issues critical to the state’s future, growth and prosperity.

Facebook Twitter Instagram YouTube LinkedIn

Sign Up for Top Picks

Our weekly e-Newsletter with the latest items and updates

What’s New

Wisconsin lawmakers in the dark on broadband

March 16, 2023

The underfunded part of Wisconsin public schooling

March 16, 2023

If we don’t pay for roads, we don’t get mobility

March 9, 2023

Assembly Speaker calls for tolling to fund Wisconsin infrastructure

March 2, 2023
© 2023 Badger Institute | Privacy Policy | Disclaimer | Sitemap

Type above and press Enter to search. Press Esc to cancel.

This site uses functional cookies and external scripts to improve your experience.

Privacy settings

Privacy Settings

This site uses functional cookies and external scripts to improve your experience. Which cookies and scripts are used and how they impact your visit is specified on the left. You may change your settings at any time. Your choices will not impact your visit.

NOTE: These settings will only apply to the browser and device you are currently using.

CRM Software

Customer Relationship Management Software

Google Analytics

Google Analytics is a web analytics service offered by Google that tracks and reports website traffic. Google uses the data collected to track and monitor the use of our Service. This data is shared with other Google services. Google may use the collected data to contextualize and personalize the ads of its own advertising network.

You can opt-out of having made your activity on the Service available to Google Analytics by installing the Google Analytics opt-out browser add-on. The add-on prevents the Google Analytics JavaScript (ga.js, analytics.js, and dc.js) from sharing information with Google Analytics about visits activity.

For more information on the privacy practices of Google, please visit the Google Privacy & Terms web page: https://policies.google.com/privacy?hl=en

Powered by Cookie Information