Tuesday, October 21, 2008
Professor Roger Groves (Florida Coastal) has published "The De-Gentrification of New Markets Tax Credits," 8 Fla. Tax Rev. 213 (2007). Here is an excerpt:
Urban America is in a state of crisis. A huge pool of America's resources is increasingly disconnected from mainstream society. That pool is within the core of major cities and particularly includes African American and Hispanic male youth. By way of illustration, more than half of all core city African American men do not finish high school. The correlation between drop-out rates, unemployment, and incarceration is profound. As of 2004, 72% of African American dropouts who are in their 20's are unemployed, up from 65% in 2000. Incarceration levels are at historic highs and increasing, where by their mid-30's, 6 in 10 of these high school drop outs have spent time in prison. That rate is four times higher than that of Black men in South Africa under the apartheid regime. Seventy-five percent of African American males incarcerated in Baltimore Maryland did not graduate from high school. The infant mortality rate among all African Americans is more than twice the national average, and is much worse among the poor in the core of urban America. After the Katrina floodwaters have receded, some see an opportunity to buy low and sell high. But the muted voices of the poor cry to keep what they had. For them it was a Katrina moment. For the urban core poor across the nation, it has been a Katrina erosion over the decades from a series of unnatural disasters.
Despite this crisis in urban America, could it be that over $ 2 billion of US taxpayer dollars designed to alleviate that problem are being co-opted for the financially well-healed? With the aid of federal subsidies, are the wealthy gentrifying the low-income areas and marginalizing the low-income residents in the process? A long-time Portland Oregon resident observed: "The heart of the black community is gone." Seattle's first and only African American mayor in the 1990's observed the transition of well-educated and mostly white newcomers into the city's Central District and said: "I am concerned and I am frustrated because I don't know what the alternates are. It clearly isn't racist; its economics. The real question you have to ask yourself is: Is this good or bad?" More to the point of this article, is the federal law, through the new markets tax credit program actually subsidizing the gentrification?
The answer to the later question appears to be either an unequivocally "yes," or adding a drop of vacillation: "It certainly appears that way." Metaphorically speaking, the proof is in the plumbing. As will be detailed below the NMTC program has been used to subsidize the development of performing arts centers for opera, ballet, symphony orchestras, hotels, high priced condominiums, theatres, mixed use commercial developments, and even convention centers. This author opines that as a matter of tax credit policy, the needs of the desperate should trump the wants of financially well-healed, and that the NMTC funds were not misappropriated, just misapplied in many significant respects - a correctable error nonetheless.