By Rick Badie
Today, we explore Georgia’s opportunity zone system, an economic development tool that’s supposed to spur revitalization in designated areas. An Atlanta city councilman writes about the latest zone — the Sweet Auburn area, which includes the Rev. Martin Luther King Jr.’s boyhood home. Meanwhile, a California union official questions the value of such tax incentives in his state.
Opportunity zones create jobs
By Kwanza Hall
Georgia’s Opportunity Zone program was created in 2008. It is one tool, among others, to help local governments bring jobs back to neglected commercial and industrial areas. The program offers a $3,500 tax break per hire, for up to five years, to businesses that hire two or more full-time employees.
Two years ago, the city of Atlanta received approvals for its first opportunity zones. Since then, under the leadership of Mayor Kasim Reed, the city has received state approvals for 11.
Governments wishing to designate an area for this incentive must show that it is within or adjacent to census blocks with a 15 percent or higher poverty rate that already have an enterprise zone or redevelopment plan. In Atlanta, our development agency, Invest Atlanta, coordinates the application process.
As our national and regional economies regain their footing, Atlanta is smart to have teed up this tax incentive for small- and medium-size businesses that contribute so much to our economy.
At a recent press conference, Commissioner Mike Beatty of the Georgia Department of Community Affairs announced the Sweet Auburn corridor as the city’s newest opportunity zone. The corridor, in the district I represent, joins previously designated areas including downtown, Midtown, Fort McPherson and the former City Hall East (now Ponce City Market).
Designation of the Auburn-Edgewood corridor is one of a number of initiatives we are putting in place to prepare for the arrival of the streetcar, which will link Centennial Olympic Park and the new National Center for Civil and Human Rights to the neighborhood that raised Martin Luther King Jr.
Last year, we announced the formation of a Main Street program for the area in partnership with the National Trust for Historic Preservation. Sweet Auburn Works will help attract public and private investment for historic facade renovations and streetscape improvements. We are recruiting the inaugural board of directors for the organization.
On April 23, we will launch a six-month process to update zoning regulations for the commercial part of the Martin Luther King Jr. Historic District. They have not been updated since the district was created 30 years ago. The process will enable us to review recent redevelopment plans for the area, identify gaps between the plans’ vision and existing guidelines, and consider contemporary business uses for historic storefronts and buildings, uses that did not exist when the guidelines were created.
For business owners and prospective business owners to take advantage of this tax credit, they have to be aware of its existence. It is my job to work with the city and Invest Atlanta to spread the word at neighborhood meetings, ribbon-cutting ceremonies and walking tours with business organizations and in communications to constituents.
I welcome opportunity zones to the city as a tool for existing local businesses and owners looking for signs the state and city stand with them. As the economy improves, the program will help existing small- and-medium-size businesses such as the Epsten Group, a midsized architectural firm on Edgewood Avenue, look to the future. The designation itself will bring new attention, followed by investment, to key properties and corridors that are poised to become participants in our city.
Atlanta City Councilman Kwanza Hall represents District 2.
Tax credit program fails California
By Art Pulaski
In theory, tax credits for businesses to create jobs are positive. They can help businesses stay competitive and strengthen communities. But what tax breaks do in practice is another story entirely, as we in California know well.
There are many similarities between Georgia’s opportunity zone program and California’s enterprise zone program.
Both programs were designed to boost jobs in low-income, high-unemployment areas. To Georgia’s credit, the opportunity zone program has some standards California’s lacks, like a requirement that companies create net new jobs to obtain the credit. Without proper accountability, wage standards and transparency, these types of tax credits can become wasteful government spending that does little to nothing to lift up economically disadvantaged communities.
Politicians love tax credits that go to their districts. That doesn’t mean those tax credits are good for constituents or for the state. California’s enterprise zone program is a $700 million annual drain on taxpayers that provides little if any positive impact to the economy.
In 2009, the Public Policy Institute of California found our enterprise zones have “no statistically significant effect on either employment levels or employment growth rates.” The California Legislative Analyst’s Office says the program is “expensive and not strongly effective.”
The California program is ballooning by more than 35 percent annually, placing our budget in jeopardy in future years. Enterprise zones simply aren’t a good return on the investment taxpayers are making. These types of tax credit programs should include strict accountability measures to require that not only are net new jobs created, but that those jobs have wage standards to ensure employers aren’t being rewarded for creating minimum-wage jobs. We call it the “jobs test.” If a tax break program like opportunity zones passes the test, it’s likely a worthwhile investment. However, if it fails that test, taxpayers are on the hook for millions. That’s a boondoggle, which is exactly what California’s program has morphed into.
California, with the support of Gov. Jerry Brown, is considering changes to the enterprise zone program that make it more transparent and accountable. But these changes can’t undo the more than $3.6 billion in subsidies companies — mostly big corporations with more than $1 billion in assets — have received since the inception of the program.
That’s $3.6 billion that could have gone toward keeping teachers in the classroom, repairing our crumbling infrastructure or programs that provide incentives for middle-class jobs. Instead, it was wasted subsidizing wealthy, mega-corporations like Walmart and McDonald’s. Many of those low-wage companies pay employees so little that they end up on public assistance.
Tax credits can be a powerful tool to create jobs, if done properly. We hope Georgia learns from the mistakes of California by requiring the opportunity zone program to adhere to strict oversight and high standards. Otherwise, your program is destined to be a miserable failure that weakens the economy instead of bolsters it.
Art Pulaski is executive secretary-treasurer of the California Labor Federation.