Crain’s reported this week that the over-hyped federal Opportunity Zone program is going poorly for Chicago.
Nobody should be surprised. The program had bipartisan support in Washington but was flawed from the start. We wrote when the program rolled out that it looked like an attempt to reinforce the worst stereotypes of both parties – greedy Republicans handing a pointless tax break to the rich, and reality-challenged Democrats wasting money on a well-intentioned program for the poor likely to fail.
Sales in Chicago-area opportunity zones in 2018 and 2019 ranked 29th out of the top 50 largest metropolitan areas, according to Crain’s. That puts Chicago’s volume on a par with far smaller cities. Markets like Houston, Miami and Portland, Ore., have seen three or four times Chicago’s transaction volume during that period.
The basic problem is that developers tend to choose sights that aren’t really blighted, which the program is intended to help, or they pick sites already on the upswing. That’s been the history of similar programs for decades.
That problem is particularly acute for Chicago because of its other particularly acute problems. Why build a project in a Chicago when you can build using the same program in a recovering market without Chicago’s fiscal, property tax, corruption, crime and other issues?
As Crain’s put it, “convincing those investors to funnel that money to Chicago’s zones—which are mostly in areas of extreme need…has proven to be difficult. Many funds are gravitating to other markets whose zones are in areas that don’t need a tax incentive to fuel development.”
If it’s any comfort, the program is funded by federal tax breaks, not Chicago or Illinois taxes.