All we do is build nice things for Mooch

So it was back in February when we started reading about how the new "opportunity zones" embedded in the Trump tax overhaul might make for a good deal of mischief from local politicians looking to hand out favors to the various real estate sharks with whom they have friendships. Today, the New York Times provides us with a little background on how these new rules were developed, as well as  how they're being applied to create "opportunities" for rich people to get richer.

The opportunity-zone tax break was targeted at the trillions of dollars of capital gains held by rich Americans and their companies: profits from investments in the stock market, real estate and other businesses, even short-term trades by hedge funds. When investors sell those assets, they can incur tax bills of up to 41 percent.

Sean Parker, an early backer of Facebook, helped come up with the idea of pairing a capital-gains tax break with an incentive to invest in distressed neighborhoods. “When you are a founder of Facebook, and you own a lot of stock,” Mr. Parker said at a recent opportunity-zone conference, “you spend a lot of time thinking about capital gains.”

Starting in 2013, Mr. Parker bankrolled a Capitol Hill lobbying effort to pitch the idea to members of Congress. That effort was run through his Economic Innovation Group. In addition to Mr. Parker, the group’s backers included Dan Gilbert, the billionaire founder of Quicken Loans, and Ted Ullyot, the former general counsel of Facebook.

The plan won the support of Senators Cory Booker, Democrat of New Jersey, and Tim Scott, Republican of South Carolina. When Congress, at Mr. Trump’s urging, began discussing major changes to the federal tax code in 2017, Mr. Parker’s idea had a chance to become reality.

In May of this year we read that something called the New Orleans Redevelopment Fund had launched an initiative to rake in as much of the financing from these schemes as it could grab. NORF executive Cullan Maumas said at the time they were seeing, "50 to 100 inquiries from potential investors every day since the regulations were clarified."

Later we learned that at least one of the properties NORF was using this "distressed neighborhood" incentive to redevelop turns out to be the Warwick Hotel located on prime downtown real estate right in between City Hall and Charity Hospital.

The official owner of the Warwick Hotel property is the NORF 3 Opportunity Zone Fund, and Maumus said the development is a big leap in scale for NORF.

"It is going to be our flagship project in the city," he said.

Prior to the Warwick purchase, the six-year-old NORF had invested about $40 million to redevelop three dozen New Orleans properties, mostly residential dwellings, though it has had a couple of larger conversions, including a warehouse at 2740 St. Louis St., along the Lafitte Greenway, where the firm's office is now located.

According to the NYT, this poaching of desirable properties that happen to lay in the boundaries of opportunity zones which happen to have been drawn by local electeds doing favors for the poachers is a widespread practice.

But even supporters of the initiative agree that the bulk of the opportunity-zone money is going to places that do not need the help, while many poorer communities are so far empty-handed.

Some opportunity zones that were classified as low income based on census data from several years ago have since gentrified. Others that remain poor over all have large numbers of wealthy households.

And nearly 200 of the 8,800 federally designated opportunity zones are adjacent to poor areas but are not themselves considered low income.

Under the law, up to 5 percent of the zones did not need to be poor. The idea was to enable governors to draw opportunity zones in ways that would include projects or businesses just outside poor census tracts, potentially creating jobs for low-income people. In addition, states could designate whole sections of cities or rural areas that would be targeted for investment, including some higher-income census tracts.

In some cases, developers have lobbied state officials to include specific plots of land inside opportunity zones.

In Miami, for example, Mr. LeFrak — who donated nearly $500,000 to Mr. Trump’s campaign and inauguration and is personally close to the president — is working with a Florida partner on a 183-acre project that is set to include 12 residential towers and eight football fields’ worth of retail and commercial space.

And it comes as no surprise that the Warwick is far from the only questionable project in New Orleans benefiting from the tax shelter.

The Warehouse District of New Orleans is one of the city’s trendiest neighborhoods. Some of the area’s hottest restaurants — as well as a new one dishing out shrimp tempura tacos — are here. So are hipster barbershops. Boutique hotels spill well-heeled tourists onto the red brick sidewalks. High-end coffee shops are packed with young people buried in their MacBooks.

And it is getting hotter. The sounds of heavy-duty equipment heaving steel or pouring cement are audible across the neighborhood.

In other words, in a city grappling with acute poverty, this is not a neighborhood that especially needs a generous new tax break to lure luxury lodging. Yet state officials have established an opportunity zone here.

That decision benefited businesses already operating or planned for the district. One of those is a 225-room hotel, part of Richard Branson’s Virgin Hotels chain, whose plans were unveiled a year before Mr. Trump signed the tax law. Its location inside an opportunity zone meant investors could earn greater profits than they otherwise would have, by financing the project with tax-advantaged money.

Oh yeah I remember when that Branson hotel was announced. The freaking mayor went down there to greet him. 

“There’s always give and take when you’re trying to build a building. Sometimes if one doesn’t have those give and takes it just never happens,” Branson said. “You managed to guide it through in an environmentally friendly way, in a friendly way for New Orleans and also a way that we could justify actually building it.”

Construction will begin in coming weeks.

“It has been a long time coming and guess what Sir Branson? You’re worth waiting for,” Cantrell said, adding that she hopes Virgin Air will follow the hotel investment. Cantrell noted the new $1 billion airport terminal, which is set to open this fall.

If there is a ga-jillionaire sicko, whose butt LaToya will not kiss at a moment's notice for a photo-op, we have not yet met that ga-jillionaire. Actually, I wonder if she has met Mooch yet. He shows up in the NYT piece too as one of Branson's investors. 

Those investors include Mr. Scaramucci, who briefly served as White House communications director in 2017 and has claimed credit for helping to create the opportunity-zone plan. “We got to get into this business because this will be transformative to the United States,” he said recently.

Mr. Scaramucci’s investment firm, SkyBridge Capital, has raised more than $50 million in capital gains from outside investors, and most of it is being used to finance the hotel, according to Brett S. Messing, the company’s president. He said the hotel was likely to be the first of numerous opportunity-zone projects financed by SkyBridge.

This is the part where I usually type, "meanwhile there is a housing crisis in New Orleans..." but the article already does something like that for us.

Less than two miles away is the poorest opportunity zone in Louisiana — and one of the poorest nationwide. The zone includes the Hoffman Triangle neighborhood, where the average household earns less than $15,000 per year. Block after block, streets are lined with dilapidated, narrow homes, many of them boarded up. On a recent afternoon, one of them was serving as a work site for prostitutes.

City officials, including the head of economic development for New Orleans, said they were not aware of any opportunity-zone projects in this neighborhood.

It's a tale of two opportunity zones.  One where wealth begets wealth and one that stays left behind. Either way there's plenty of prostitution in evidence in both.