Some affluent areas in Arizona are designated as ‘distressed’ under federal program
PHOENIX (3TV/CBS 5) - When President Donald Trump created the “Opportunity Zone” program in 2017, the intent was to inject investor capital into distressed communities. The goal was to help revitalize places like Coolidge, Arizona. But more than four years after the program began, there is little or no data to show if the opportunity zones created the intended prosperity.
“The only thing we can say for sure is that wealthy people are paying less in capital gains tax, federal capital gains tax, and state capital gains tax than they would otherwise,” said Greg LeRoy, who is the executive director of the watchdog organization, Good Jobs First.
LeRoy says one problem appears to be that the program was created by an executive program, and its authors did not implement lessons learned by other federal economic stimulus programs for distressed and impoverished communities.“If you don’t make sure that there are local benefits, community benefits attached, you won’t get community benefits,” said LeRoy.
In Coolidge, which is located a little more than an hour southeast of Phoenix, city leaders jumped at the chance to attract Opportunity Zone investment. “We wanted to see how it would work,” said Gilbert Lopez, who is the city economic development director. Lopez estimates that there are at least seven businesses that were eligible for the program, but he does not know how many actually participated.
Under the Opportunity Zone guidelines, investors are able to reduce or avoid capital gains taxes for money they have invested in funds used in economically distressed areas. Each state governor was able to identify and designate Opportunity Zones, with the approval of the Trump Administration. And while Coolidge sites are in one of the zones, so do Old Town Scottsdale and downtown Phoenix, which are arguably affluent and economically successful.
LeRoy says Arizona is not the only state where the designation includes both distressed and visibly affluent areas.
“Immediately when the zones were named, many observers said that there are places here that you and I probably wouldn’t agree need help,” said LeRoy. He argues that the loss in capital gains tax has negative impacts. “The harm is that you’re going to waste money when you may have more important needs reducing class size or improving public health or making infrastructure more effective,” said LeRoy.
In Coolidge, the economic climate is looking up. New subdivisions are popping up. Housing values have risen, as well as the tax base. Nikola Motors built a giant factory on the south end of town and is gearing up to produce electric semi-trucks. But there is no way to know if the Opportunity Zone program had anything to do with the new prosperity.
The state of Arizona does not oversee the Opportunity Zone program and does not have data on the results. And there is no publicly-available federal data on the subject.
The discrepancy between opportunity zones has been noticed by members of Congress who have introduced bipartisan legislation to bring changes to the program. In April, Senators Cory Booker (D-NJ) and Tim Scott (R-SC) and Representatives Ron Kind (D-WI) and Mike Kelly (R-PA) introduced a bill called the Opportunity Zones Transparency, Extension, and Improvement Act.
The bill would expand reporting requirements and end opportunity zones for areas that are not impoverished. “Gaps in Opportunity Zone programs have barred economically distressed areas from accessing the critical resources they need to create new local opportunities. This legislation will help close those gaps and ensure that Opportunity Zone investments lift up low-income communities – spurring further investments,” said Senator Chris Van Hollen.
Both bills are pending in House and Senate committees.
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