Trump has come to Chapel Hill.
The federal Tax Cuts & Jobs Act, signed into law in December 2017, created an investment vehicle to allow the very wealthy to avoid paying taxes. The idea was presented to the public as a way to attract new development to high-poverty areas. A thousand such areas were identified in North Carolina, and 252 of them were certified as “opportunity zones.” The zones were chosen through “direct outreach and close collaboration with local officials,” according to the N.C. Department of Commerce website: https://public.nccommerce.com/oz/#section-overview.
Chapel Hill had two qualifying “high-poverty” areas. One was the residential area south of West Franklin Street. The one chosen was the residential area encircled by East Franklin Street to Estes Drive and Martin Luther King Jr. Boulevard. That area encompasses the Franklin-Rosemary Historic District, which has some of the most expensive houses in town; the 100 block of East Franklin Street, which defines Chapel Hill’s downtown charm; and the town’s largest middle-class neighborhood, walkable to schools, the library, medical care and a grocery store. Commercial areas along the perimeter include the iconic Sunrise Biscuits, the Y and one of the few urgent care clinics in town.
Where is the poverty in all of that? The students in The Lark (formerly The Lux) who come from wealthy families and don’t have to work their way through college.
The new owners of 137 E. Franklin St. will be able to use this investment vehicle in redeveloping the former NCNB building, drawing in money from the ultra wealthy who want to avoid paying taxes on the profits they’ve made from other investments.
Given the track record of other federal investment vehicles to aid the very rich, I don’t see much benefit for Chapel Hill.
Remember securitization? Investors bundled together high- and low-performing mortgages and sold shares of the bundles like stocks that pay dividends. In short order, banks realized they could make money from the upfront points charged in a loan, then dump the risk into a securitized bundle. Banks took on ever more risky loans, colluding with bond-ratings agencies to keep quiet about the risk. Eventually, the entire Ponzi scheme collapsed, and the only ones who made money — and lots of it — were the initial investors. Taxpayers were left to clean up the mess of The Great Recession of 2008.
The unintended consequences of this “opportunity zone” are showing up already. Investors are buying up homes in the historic district to amass large parcels, then tear down the historic homes and build multifamily rentals instead. I expect resale values of homes near Estes Hills Elementary and Phillips Middle schools to dip, given the town’s tacit agreement that this area is blighted and ripe for rezoning into commercial and multifamily development.
I’m well aware that we, as a town, have been living above our means for some time, and that a “market correction” is in order in the form of a tax hike. But we don’t need to pile on by agreeing to a scheme that brings increased tax revenue from one or two commercial products at the expense of the quality of life of homeowners.
– Nancy Oates
