If you ask many people living in neighborhoods that have been overlooked for investment in recent years what they’d like to see built in their communities, it’s unlikely they’d answer “a storage facility.”
But under the Opportunity Zones provision of the $1.5 billion Tax Cuts and Jobs Act passed by Congress in 2017, that’s exactly what San Antonio’s South Side will be getting.
According to the San Antonio Express-News, a San Antonio business management company called DPR Investments will build a “$16-million, climate-controlled self-storage facility with flex space at the Brooks master-planned community.” According to the Express-News, the company commissioned five studies to determine the best use of the nine-acre site. It is unclear whether the surrounding communities or residents had any part in those studies. Construction is slated to begin this fall.
Opportunity Zones create tax breaks for private investors if they invest in census tracts that have at least a 20 percent poverty rate and a median family income of 80 percent or less of the median family income of the region. Governors across the country nominated a quarter of the census tracts in their state that met this criteria. In Texas, Gov. Greg Abbott nominated 628 census tracts.
Sen. Tim Scott of South Carolina included the Opportunity Zone provision to extend a lifeline to communities experiencing economic distress or slow economic growth. According to the New York Times, the provision was never debated in the House or Senate, but passed nonetheless in the rush to overhaul the tax code.
Sparking business and investment in areas that need it is a good idea and can transform and empower neighborhoods. The problem is that Opportunity Zones have very little requirements for the investors, and their development does not necessarily have to help people who live in those communities. The activities and projects that Opportunity Zones can help finance are broad, according to the Urban Institute, and can range from commercial and industrial real estate to infrastructure and housing. The property on which the investors are developing must be “substantially improved,” but there’s little definition about what that means.
There are 628 Opportunity Zones in Texas and more than 8,000 nationwide. The Dallas Federal Reserve warns about potential red flags and risks of the policy, including displacement, gentrification, and the lack of transparency and regulation.
“[The program] could lead to supporting businesses that aren’t really assets in our community,” Christine Maguire of Austin’s redevelopment division told Next City. Austin is home to more than 20 Opportunity Zones, many in gentrifying areas. “Often, it’s not a lack of capital. It’s the lack of the right kinds of capital in fast-growing areas like Austin.”
Essentially, investors receive public funds through capital gains tax breaks and are not technically required to provide a public good because of such broad regulations.
Communities across Texas should keep an eye out for additional deals such as this storage facility in San Antonio. There will likely be more. Communities and advocates had very little opportunity to impact this provision of the tax overhaul. But there are chances moving forward to impact how this policy is utilized.
Texas Housers discussed Opportunity Zones in our first episode of our podcast, A Little Louder. You can listen to it here.