Fixing America’s Forgotten Places
Opportunity Zones, created by Trump’s tax law, are meant to encourage investment in struggling communities. But in the poorest cities, many fear the program could do more harm than good.
FRESNO, Calif.—Census tract 06019000100 has a lot going for it. Locals cheer the melting-pot atmosphere, the arts scene, the nearby nature, and the affordable housing—affordable in national terms, which feels all the more amazing given that it is a quick drive both to the grandeur of Yosemite and to the tech hub of the Bay Area. Start your car up and grab a coffee here at 9 a.m., and you could be standing in downtown San Francisco or in front of Apple’s headquarters by noon.
For all that, though, this tract has its problems. There is the stifling summer heat, the poverty, and the pollution. Technology companies have not flooded into the area like they have in the Bay and in Reno, and the city faces underinvestment and blight. Roughly two-thirds of the families in 06019000100 live below the poverty line. The surrounding county is economically depressed too, with an unemployment rate above 8 percent, one of just a handful of places nationally where that is still true. Moreover, the income gap between households in Fresno County and Santa Clara County, where Apple is headquartered, has widened in the past 10 years.
Still, Fresno is a place that feels on the cusp, as if just a little more investment, a little more infrastructure, and a little more spit and elbow grease might help it thrive. It has what a real-estate broker might call “good bones,” with plenty of lower-cost real estate and highway saturation. It has a steady supply of educated workers, by virtue of being home to Fresno State, among other schools. And it has a powerful industrial base, in terms of agriculture as well as in other industries. “If you are a company that is looking at having a West Coast presence, especially a distribution or an e-commerce center, there’s no better place than Fresno County right now,” said Lee Ann Eager, the president of the Fresno County Economic Development Corporation (motto: “Living the California dream”).
That little nudge might just be forthcoming. A provision slipped into the Trump administration’s sprawling tax bill aims to transform places like census tract 06019000100 by luring private dollars to them. In Opportunity Zones, as they are called, investors will receive huge tax breaks for building office parks, warehouses, housing, grocery stores, and the like, helping to ease poverty and end blight in distressed communities. Despite being not much more than a remainder in the legislation, economists believe it could end up becoming the biggest place-based economic-development policy the federal government has.
“The key factors that have led to our uneven recovery are education, infrastructure, and workforce development. Can I address those three pillars by putting a target, a positive target, on distressed communities? Can I address those three issues and make a profit [as an investor] while also doing good?” said Senator Tim Scott, the South Carolina Republican who sponsored the provision, sitting in his Capitol Hill office—that’s census tract 11001008200. “The answer is yes.”
The answer to whether the Opportunity Zone designation might help places like Fresno might indeed be yes: Mayors and economic-development officials are enthusiastic about the initiative and scrambling to figure out how to capitalize on it, as are real-estate investors and developers. But economists argue that it looks unlikely to help revitalize the country’s most distressed communities—Flint and Detroit, the Mississippi Delta and Appalachia, Toledo and Youngstown—and that it looks likely to supercharge investment in places that were already growing. That means the provision might intensify the very regional inequality it seeks to remedy.
This is the dilemma posed by pursuing public policy with private capital. Leveraging the efficiency of markets will undoubtedly help many places on the margin. But it might take far more creative investment to truly solve the country’s worst-off communities and fix its growing problem of place.
Since the 1840s, America has become a more equal place—or, more to the point, places in America became more equal. The South caught up with the North. Electrification, the rise of the car and truck, the development of the highway system, the growth of manufacturing, and the federal government’s enforcement of antitrust statutes spread prosperity around the country. Aided by the Great Society and the New Deal, the middle class grew, everywhere from Winnetka to Orlando to Humboldt. As Phillip Longman noted in this magazine, the disparities in per-capita income across the different states shrank through the 1980s.
Then, something changed. The differences in per-capita and median income between states started growing again. Average incomes in big cities, in particular hubs such as San Francisco; Washington, D.C.; Chicago; Seattle; and New York, soared. Average incomes elsewhere stagnated. The recovery since the Great Recession has only aggravated these trends, with rural employment and earnings actually falling in the postrecession years in many places. The average income in census tract 060081600115, in Atherton, California, is $250,001. The average income in census tract 060064680028, in Mendota, California, is 20 times smaller.
Comments
Post a Comment