Cincinnati is the site of several "opportunity zones" recommended by Ohio Gov. John Kasich's administration for a federal program designed to increase investment in low-income neighborhoods.
The Opportunity Zone program, ushered in by Republicans in Congress as part of last year's tax reform efforts, is aimed at bringing in more money to neighborhoods that have seen scant investment or business creation in the past few decades. But it's untested and could have downsides, some policy experts warn.
Kasich's administration's local recommendations for the program encompass Census tracts in Avondale, Bond Hill, Camp Washington, Corryville, South Cumminsville, Evanston, North and South Fairmount, Madisonville, parts of the Price Hill neighborhoods, Northside, Queensgate and the West End.
Overall, Ohio recommended 320 tracts for the program — 25 percent of its low-income Census tracts and the maximum allowed under the program.
The state considered local input from city and county elected officials, development professionals, port authorities and other groups in making its selections. Most counties submitted more than 25 percent of their Census tracts for consideration, according to the state. CityBeat is seeking further information about the selection process locally for those zones.
Lawmakers say it will work by providing capital gains tax breaks to investors who pour that income into "opportunity funds" for businesses that locate in the designated areas. Investors can put their capital gains into an opportunity fund and, after 10 years, sell their holdings from that fund without tax liability.
Census tracts designated by states must meet income criteria to be included in the program.
However, some policy analysts fear the zones could have little benefit for low-income residents of the communities in which the investments take place and could spur neighborhood change that displaces them.
"The theoretical effect of the Zone tax subsidies on local residents is ambiguous," Brooking Institution's Adam Looney wrote in late February. "It’s a subsidy based on capital appreciation, not on employment or local services, and includes no provisions intended to retain local residents or promote inclusive housing."
Looney goes on to point out that Opportunity Zones differ in important ways from past federal programs centered around Census tracts like the Clinton-era Empowerment Zones program, which included incentives for local employment, boosts to locally-owned business and provided grants to municipalities to invest how they saw fit. No such mechanisms exist within Opportunity Zones — meaning, Looney says, they could just become tax breaks for those with capital gains sitting around provided at the expense of low-income residents.
"The design of Opportunity Zones might encourage pressure on states to maximize tax benefits to their citizens—including their developers—to select gentrifying neighborhoods rather than the most distressed neighborhoods," he continues. "Already-gentrifying areas are guaranteed to have large capital gains. Selecting those areas would maximize the tax savings to investors who would otherwise face large tax bills down the road. In contrast, the benefit for investing in moribund or deeply impoverished areas where rents and property values are stagnant is speculative."
Others have been more positive about the concept, including Democrats like U.S. Sen. Cory Booker. The New Jersey senator, along with Republican U.S. Sen. Tim Scott, helped draw up the Senate provision within last year's congressional tax reform bill that created the Opportunity Zones program. Supporters say the initiative could draw billions in investment — and thus, jobs — to low-income communities across the country.
Among the tracts selected in Cincinnati is Census Tract 264 — one in which FC Cincinnati has proposed building a professional soccer stadium should it get a Major League Soccer expansion franchise.
During wrangling over the site of that stadium — which is not universally welcomed in the neighborhood — FCC GM Jeff Berding pledged that he would push to get a stretch of Linn Street containing the neighborhood's struggling business district named an opportunity zone. The tract has a median household income of around $13,000 a year and has seen decades of disinvestment.
