Why you should care
Because opportunity zones have united left and right, but there are signs of trouble ahead.
It’s taken weeks to schedule this call with the Birmingham mayor’s office, so I’m skeptical when the city’s economic development director, Josh Carpenter, asks if he can call me back because he has a fire to put out.
It turns out he’s not just blowing smoke: The Stonewall Building is actually on fire. The 12-story building was vacant for 40 years, until now an ironic eyesore to what has otherwise been a downtown Birmingham renaissance. Yet it is now the site of a $24 million renovation made possible partly thanks to the federal Opportunity Zone program included in the Tax Cuts and Jobs Act of 2017. The fire is only a momentary setback in a project that’s part of what is the most transformational federal investment in cities in decades — one riding on unlikely alliances.
Offering a decade of tax relief for funds invested in designated “opportunity zones,” the program is coaxing investment in nearly 9,000 communities in all 50 states, spanning neighborhoods with about 30 million Americans and spawning odd partnerships. Created by a Republican-controlled Congress and the Trump administration, the program has been championed by a lefty pop artist (John Legend), a liberal California governor (Gavin Newsom) and a Democratic presidential candidate, New Jersey Sen. Cory Booker. While Washington politics may be red, blue enclaves from Sacramento to Cleveland to Brooklyn — and nearly everywhere between — have embraced the aid.
This project … aligns with my vision of uplifting disinvested communities especially.
Sharon Broome, Mayor, Baton Rouge
But there are signs that alliance could be cracking. Booker joined several key Democrats in a letter last week calling for major changes to the program after a spate of reports about abuses by politically connected companies. The letter prompted swift pushback from the White House and Republicans. With election season picking up and President Donald Trump accelerating his outreach to Black voters, a program he could have touted as a bipartisan win for America’s urban areas is at risk of becoming another partisan clash.
On the ground, opportunity zones still have plenty of defenders — and success stories. In Birmingham, a Community Investment Board and Committee uniting civic leaders of all political stripes is educating 500 locals on the program. “In a city that is trying to recover, and trying to claw itself out of recession, we can’t afford to have any tool in the economic development toolbox not be as sharp as possible,” says Carpenter, after returning my call. Meanwhile, in Baton Rouge, Louisiana, a once-abandoned power plant is being developed into a mixed-use space for entertainment and affordable housing, and a passenger rail line that could connect the city to nearby New Orleans is coming up.
“This project is risk-free for us, and it aligns with my vision of uplifting disinvested communities especially,” Baton Rouge Mayor Sharon Broome says — regardless of whether or not the Democrat agrees with Trump.
To be sure, some experts have warned that tax breaks under the program could go to projects already underway in neighborhoods on the rise, hastening gentrification. For example, a “little sliver” of a parking lot in Baltimore allowed a non-poor census tract in one of America’s poorest cities to be designated an opportunity zone by the governor of Maryland, as The Baltimore Sun reported, potentially pumping millions of dollars of tax breaks into a redevelopment deal that was already in the works. “It was not the intent of Congress for this tax incentive to be used to enrich political supporters or personal friends of senior administration officials,” Booker, along with U.S. Reps. Emanuel Cleaver and Ron Kind, wrote in their October letter to the U.S. Treasury Department.
Build Baton Rouge CEO Chris Tyson, who has championed investment in the city’s opportunity zones, admits the problem. “We know we’ve got opportunity zones in Brooklyn, in Oakland, areas that were already attractive areas for investment, that are now even more attractive,” he says. “I suspect we’ll see capital rushing into those areas before it trickles down to secondary and tertiary markets.”
Even if investment trickles down, it likely won’t get to those who need it most. Smaller cities must balance between picking qualifying areas most attractive to investors and the desire to assist poorer tracts. In Baton Rouge, Tyson says, the city’s southern half is affluent and has some racial diversity but is mostly middle class and upscale, whereas the northern part is largely Black and poor. “It’s a challenge,” he says. “If you’re an investor that wants the same rate of return you’re going to get in the best neighborhood and the tax credit, it’s unlikely I can give you that in a severely distressed market.”
Still, city developers argue that opportunity zones represent one of the only lifeboats handed to struggling neighborhoods in a while. They are a rare chance for hope amid economic blight that has seen many of them struggle with population loss and disinvestment.
In Baton Rouge, emphasis was made on contributing to neighborhoods of color. “My goal was to revitalize areas without removing the people in that community,” says Broome, the city’s first African American female mayor. Officials in Birmingham, led by Democratic Mayor Randall Woodfin, built a poverty-controlled model that led to 24 Birmingham census tracts being selected as opportunity zones — with poverty rates ranging from 19 percent to as high as 70 percent.
That emphasis also means being willing to work with anybody, no matter how politically misaligned. The staunchly Republican governor of Alabama, Kay Ivey, signed off on those Birmingham opportunity zones — giving the city more than twice the number of designations as the next-most-awarded place in Alabama. Charles Barkley, the Hall of Fame forward, joined its advisory committee. “While there may be friction at the theoretical level, at the project level, it’s not that difficult to work together,” Carpenter adds. If sparks do fly, it will be from building the future — and maybe the occasional construction site fire.