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. 

Maybe Sidney can buy it

Probably we shouldn't speak such things into being but Sidney has been running around scooping up iconic New Orleans properties as well as bars/music venues lately.  And, well, now it looks like the Dew Drop Inn is available.

Plans to redevelop the historic, dilapidated Dew Drop Inn building on Lasalle Street in Central City into a modern hotel, restaurant and music venue have officially been scrapped.

A deal had been in place late last year that would have seen the 80-year-old, predominantly Jim Crow-era music venue sold to a developer with plans to renovate the two-story, 10,000-square-foot space to include 15 hotel rooms, along with a restaurant, music venue and a museum dedicated to New Orleans music.


But that deal — to sell the space to Ryan Thomas and his company Peregrine Interests — fell through at the end of the year. In late April, the effort officially ended.

Back in 2015 then councilwoman LaToya Cantrell helped create a cultural overlay district intended to spur development along that stretch of LaSalle Street. 

The LaSalle Street overlay is designed to promote businesses catering to the cultural arts and live entertainment as well as hotels, similar to what was done on Freret Street. Adult-themed businesses and karaoke bars would not be permitted.

The main benefit of the proposal would be to pave the way for the redevelopment of the historic Dew Drop Inn into a boutique hotel and live music venue, Cantrell said.

No idea why karaoke is prohibited.  Maybe that's what killed the Dew Drop plans. In any case, the zoning overlay is still in place. So if somebody wants to invest in a live music club in that spot, the opportunity exists, theoretically.

BUT, speaking of opportunity, last week we mentioned this quirk in the way the Trump Administration is handling so-called "opportunity zones" now that makes them even more open to exploitation as scam tax shelters than they already were.  Is the Dew Drop in one of those? The way this is drawn it looks like it might be just the wrong side of the street. But I don't know how that boundary works, exactly. If so, it might make the land more valuable to "investors" as a vacant lot than anything else. 

 Not that this would deter Sidney from buying it one way or the other.

There's a lot of opportunities

If you know where to take them 

A new federal program pitched as a way to aid low-income communities is ramping up across Louisiana, but after a political scramble to make various struggling areas eligible for the tax break, it's investors and real estate developers who are starting to reap the benefits.

Last year, more than 150 census tracts in Louisiana were designated as Opportunity Zones under a provision in the 2017 tax-cut bill designed to encourage investment in economically hard-hit areas.

Basically what this says is the Trump tax cut bill was turbocharged with "opportunity zone" breaks for your local electeds to hand out as patronage to real estate developers who will be rewarded for building more nice things for rich people. 

Another potential hiccup, according to tax-law analyst Samantha Jacoby of the left-leaning Center on Budget and Policy Priorities, is that the program does not include any requirements that local residents benefit from the investments.

Wealthy people, not poor people, are the ones who have capital gains, she noted. And areas that are already attractive to investors are getting the benefit, such as the New York City neighborhood where Amazon has announced its intention to build a new headquarters.

"While the new tax break enables investors to accumulate more wealth, it includes no requirements to ensure that local residents benefit," said Chuck Marr, a colleague of Jacoby at the CBPP, where he focuses on federal tax policy.

When the law was being crafted, Tulane’s Lalka said it was pitched as a way of enticing people to invest in start-ups and small businesses. But since it’s been enacted, real estate has dominated the activity surrounding the program.

The "zones" are determined at the state level which means that John Bel Edwards's LED got to cut hundreds of deals for Cedric Richmond and countless local officials. The bankers and developers connected to Cedric or to this or that city councilperson or mayor swarmed in to take advantage. Joe Jaeger is here. So is Sidney Torres. And.. well... here we go with another one of these stories.

Let's make lots of money.

I know this isn't exactly shocking or anything but I do like to remind people just how little incentive any elected person has to do anything except enact special favors for the wealthy.  It's one reason, even the feints they make at providing relief for people being squeezed by rapacious capital are careful to treat only the symptoms and not the disease.

Specifically, the council's resolution asks the Legislature to consider a constitutional amendment to help residents whose tax bills have doubled in one year, who have lived in the city since 2004 and who have low to moderate incomes.    Council members said the idea is to help people who have seen their home values and resulting property taxes skyrocket due to pricey renovations on nearby homes.

Often, investors will buy an old property, pour in tens of thousands of dollars of renovations and quickly sell it for a profit, a practice commonly known as house flipping. The proliferation of short-term rentals in the city has made such flipping more common.

The council's proposal "doesn’t hurt anyone who has paid half a million dollars for a house," said Councilman Jay H. Banks. "But it also does not penalize people who have been living in neighborhoods their whole lives, who haven’t ever seen half a million dollars."

Maybe if Jay Banks weren't so careful not to hurt the house flippers, we wouldn't be stuck in a cycle of figuring out what tax credit we have to grant to middle class homeowners in order to mask the damage done by the massive privileges granted to the plutocrats.

It's a cycle that's about to start again, by the way.  I'm not sure how many people caught Banks's comments during the last round of bickering over short term rentals.  Neither paper quoted him on this point but, at the January 10th Council meeting,  Banks said he no longer believes STRs are killing affordable housing.  He even suggested creating... yep...  "opportunity zones" ...where they would be more liberally permitted in residential areas he, or whichever developers have his ear, might deem in need of a little investment.