June 14, 2020

Trumped up, left behind

A boarded-up duplex just west of the Jordan River at about 850 South, within the Poplar Grove Opportunity zone that was skipped over.Vacant, rundown shopping market on Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over. The Acapulco Market at 1430 W. Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over. Vacant, rundown shopping market on Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over. Empty lot next to the former Alcala Law Firm at 1390 W. Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over. Empty lot next to the former Alcala Law Firm at 1390 W. Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over. Crossroads Urban Center Westside Food Pantry on the corner of 1400 W. Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over.
A boarded-up duplex just west of the Jordan River at about 850 South, within the Poplar Grove Opportunity zone that was skipped over.Vacant, rundown shopping market on Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over.|The Acapulco Market at 1430 W. Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over.|Vacant, rundown shopping market on Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over.|Empty lot next to the former Alcala Law Firm at 1390 W. Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over.|Empty lot next to the former Alcala Law Firm at 1390 W. Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over.|Crossroads Urban Center Westside Food Pantry on the corner of 1400 W. Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over.|||| A boarded-up duplex just west of the Jordan River at about 850 South, within the Poplar Grove Opportunity zone that was skipped over.Vacant, rundown shopping market on Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over.|The Acapulco Market at 1430 W. Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over.|Vacant, rundown shopping market on Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over.|Empty lot next to the former Alcala Law Firm at 1390 W. Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over.|Empty lot next to the former Alcala Law Firm at 1390 W. Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over.|Crossroads Urban Center Westside Food Pantry on the corner of 1400 W. Indiana Ave., within the Poplar Grove Opportunity zone that was skipped over.|||| |||||||||
By Eric S. Peterson

President’s program to bring business to poor communities skips over west side as pandemic grips economy

The following was written and researched by The Utah Investigative Journalism Project in partnership with The West View.

There’s an old gambler’s expression that “Scared money don’t make no money.” Translation: you can’t win, if you don’t play. In 2017 President Trump created the “opportunity zone” program meant to encourage wealthy investors to roll the dice and bet on riskier investments in poorer, underserved communities that they might otherwise avoid. In return, the investor ups their odds of a profit by gaining lucrative tax breaks.

Since then, numerous reports have come out of how wealthy investors have learned it's better to cheat at this new game then play by the rules. ProPublica reported how one opportunity zone covered a superyacht marina in Florida, another benefitted a real-estate development company co-owned by Trump’s son-in-law, Jared Kushner. Critics say it has been a jackpot for the wealthy and craps for the distressed communities that were supposed to benefit.

Experts say it's hard to know if this benefit has helped local, distressed communities, but in Salt Lake City a cluster of downtown luxury real-estate developments will likely benefit, so will the Inland Port. Actual west-side investments are a mixed bag, especially in Poplar Grove, where one section of the low-income and racially diverse neighborhood was originally on the list to become a zone, only to get bumped off the list by the Salt Lake City Mayor’s Office.

Opportunity Knocks

The program allows investors to gain tax breaks by keeping their investment in an opportunity zone for the long term; if they keep their capital in a project for 10 years, they will pay zero capital gains tax on that investment when they cash out.

Capital gains taxes previously could amount for as much as 20% of an investment, so the program offered a big, juicy zero-percent tax to investors. At the same time, it would encourage investors to make it rain venture capital dollars on poor opportunity zone neighborhoods. Win-win right?

James Wood, the Ivory-Boyer Senior Fellow at the Kem Gardner Policy Institute at the University of Utah, says most of the winning is happening with real-estate developers and less so with underserved communities.

“I really think it’s had some perverse consequences,” Wood says of the program. He notes that residential homes circling downtown were low-income enough to qualify the area for the program--largely to the benefit of luxury real-estate projects, including six different downtown high-rise projects currently under construction.

There’s no tracking done of projects that benefit, but these downtown developments would likely be prized opportunity-zone investments. And while these projects will invariably provide construction jobs, the majority of the apartments built will not be affordable housing.

The developer of one of the major downtown projects told Wood the opportunity zone didn’t make a difference in deciding to pursue the project, as it was a promising project on its own merits.

Other downtown projects have long been on the books prior to the opportunity zone program’s rollout in 2017 – the Inland Port has been in discussion since 2016 and the Convention Center Hotel has been in the works since 2013.

“It might be some icing on the cake,” Wood says, “But [these projects] were committed before opportunity zones came into play.” Hence the perverse consequence: funds going to projects already underway instead of places that might truly need the boost.

Bumped

Governor Herbert’s office took hundreds of potential opportunity zones nominated by communities across the state before selecting the final 46 in June 2018. In April 2018, community advocate, Michael Clára, was pleased to see at an open-house meeting several west-side neighborhoods displayed at the top of Salt Lake City’s list to be sent to the governor. A few weeks later he was shocked to see one Poplar Grove tract bumped off that had previously been in the city’s top five.

“What criteria was used to drop it?” Clara asked in an email to the governor’s office in May 2018, noting that the Poplar Grove tract was more distressed than others that were approved. “Who decided that tracts with less poverty and ethnic minorities would benefit from this program at the expense of those in Poplar Grove?”

According to Ben Kolendar, the Acting Director of Salt Lake City’s Department of Economic Development, what happened is that the city offered their choices, the county rejected two and the state dropped one as well. After the state’s decision, then Mayor Biskupski wrote to the Governor’s Office and asked them to reconsider.

Kolendar who worked on the project at the time says it came down to a tough decision with one of the Poplar Grove tracts being dropped in favor of securing a North Temple zone instead. The zone that got bumped ran west from the Jordan River to Redwood Road and from 500 South down to approximately 900 south. This tract was previously number 5 on the city’s priority list.

Kolendar says the city’s approach to the zones was to prioritize those that had other programs working to their benefits like redevelopment agency projects in the works to maximize the impact of the zone designation.

“Having multiple tools in your tool belt in certain target areas is the approach we took,” Kolendar says.

Millions had already been invested into the North Temple corridor to help develop a housing and transit node, along with $4.5 million invested into connecting the Legacy trail to the Jordan River trail.

The bumped Poplar Grove neighborhood had plans for an RDA project but not one as fully developed.

“We were highly interested in the lost [zone] in Poplar Grove,” Kolendar says, but “that area was speculative based on a future RDA project area rather than an existing one.”

While the results of the zones are hard to measure, Kolendar says at least the Granary District is doing well, and benefitting from its zone designation and developers there he’s talked to say projects are moving forward despite the pandemic’s effect on the economy.

The “lost” Poplar Grove zone fell prey to needing more help than others, the strange Catch-22 Wood had worried about with the program.

It’s the same “perverse consequence” that troubled west-side Councilman Andrew Johnston who represents the Glendale, Poplar Grove and Fairpark neighborhoods. He says he didn’t have much input on the Poplar Grove area getting bumped. He also remembers wondering why the Inland Port needed the perk of a zone designation over zones like Poplar Grove.

“I don’t know how much more incentive people need to build out there,” Johnston says of the Northwest Quadrant. “Especially with the Inland Port having such a massive amount of tax increment [financing] they can use.”