/‘One thing begets the next’ Trump officials declared his tax cut a boon for poor Mississippi communities, but promises of affordable housing remain elusive

‘One thing begets the next’ Trump officials declared his tax cut a boon for poor Mississippi communities, but promises of affordable housing remain elusive

December 9, 2019 This story was co-published with the Center for Public Integrity. A Mississippi businessman was able to buy a Vicksburg sawmill that was on the brink of closing down under President Donald Trump’s plan for money to poor areas across the country. To make millions of dollars of improvements to the facility, he closed the Anderson-Tully former plant. He reopened the mill and filled 125 of its 158 positions. William Van Devender was the owner. He had used a controversial provision from Trump’s Tax Cuts and Jobs Act of 2017, called opportunity zones. These offer incentives to developers and businesses to invest in long-term projects in economically distressed areas. According to the New York Times, Mississippi officials called the deal an American success story. George Flaggs, Vicksburg’s Mayor, credits the Opportunity Zone with saving jobs. This makes the city a national example for the program. He said, “It’s about putting food on the table.” Leaders have promised that the incentives would bring jobs and affordable housing to the targeted communities. This will ensure that the benefits do not only reach wealthy investors, but also workers like Tiffany Rankin (a bus driver for public schools) who lives in Vicksburg’s opportunity zone. Rankin was searching for a better job after Vicksburg Forest Products changed ownership. She claimed she applied for many openings, but was unsuccessful in securing one. Rankin stated, “What’s all the point of building houses and businesses if no one can afford them?” “Or you can’t go and patronize this business because your money is gone?” This was how tax breaks were granted to the area. The Rankin apartment and plant are both within the 8,700 census tracts that local governors chose and which were designated by the Treasury Department as opportunity zones in 2018. Rankin shares concerns expressed by opportunity zone critics, who fear that the provision may leave behind those most in need. Samantha Jacoby, senior tax analyst at the Center on Budget and Policy Priorities, an independent Washington, D.C.-based research institution, stated that nothing in federal law directs money to areas most in need or projects most beneficial for low-income individuals. If the area’s median family income is below 80 percent or the poverty rate is greater than 20 percent, a tract is eligible. Out of 400 eligible tracts, Mississippi selected 100 opportunity zones. Investors who transfer money that they earned from the increase in value of assets such as stocks and real estate into opportunity zone projects can delay or reduce taxes. The investor pays no taxes on any capital gains made through the opportunity zone investment after ten years. Mississippi Today obtained emails showing Van Devender, who donated to Trump campaigns and Gov. Phil Bryant applied for the designation of the sawmill as an opportunity zone in March 2018, two months before the sale was finalized. Kings, a community of 4,664 people, drives poverty in the tract. However, it is wealthier than the average Mississippi municipality. According to 2017 census estimates, the median family income in Mississippi is $66,491 and $52,689 in the state. The poverty rate in the state is 21.5 percent, up from 16% in 2015. Rankin lives in Kings just north of Vicksburg, in a nearby public housing complex. She makes $12.70 an hour working as a bus driver. This is a job that she does between 25-30 hours per week, while raising her three teenage children. Rankin estimates that she typically earns $700 a month after taxes, retirement, and paying several hundred dollars for health insurance premiums. She worked eight months in a plant just 20 minutes from her home, often working 12-hour shifts and late into the night. “It’s hard. You have to make a choice between ‘Ok. We have enough money to do that’ or letting your children suffer. Or, I can give them all they need financially but not emotionally.” She hoped that the sawmill job would pay at least more. The plant is close enough that she can walk to work even if her car breaks down. Perhaps then she would be able to afford to buy her own house and move from her apartment, where her high utility bills outweigh the low rent. She never did get the job. Flaggs and officials agree that she is still benefiting from the developments. Flaggs points out the Texaco gas station in the area, which he believes is supported and supported by the local labor market. When you create jobs in the community, any industrial improvement will enhance it. There is a Texaco convenience shop up there. You also need to have gas. Flaggs stated that food is essential for transportation. Truck driver Charles White is one of the workers at the sawmill. He often stops by the gas station for hot dogs and frozen pizza during his lunch break. White was hired by the saw mill in August. He lives with his wife in Warrenton, south of Vicksburg. White, who had spent long hours and nights driving his trucking business, took the $14.50 an-hour job at the sawmill to be able to spend more time with his family. White stated that he doesn’t believe the pay is sufficient to allow him to take care of his family as I would like. The average salary for Mississippi’s sawing machine and tractor operators is around $30,000 per year. This is $8,000 more than what Warren County’s average household earns, according to National Low Income Housing Coalition. However, the average wage for a three-bedroom apartment at the market rate rent is still not affordable. Ben Carson, Housing and Urban Development Secretary, visited Vicksburg last year to celebrate what he called one the first opportunity zones developments. Later, he stated that the saw mill investment led to affordable housing development surrounding the plant. “That led to builders coming in and starting building homes for employees. It works that way. “One thing leads to another,” Carson said to a Bloomberg News reporter back in March. A review of Vicksburg’s building permits revealed that no such projects have been found. Van Devender, who is the new owner of the sawmill, said that he wasn’t aware of any developments resulting from his investment and that his company was not required to build housing. Van Devender stated that he didn’t know much about the situation and that his employees don’t have to build housing. It is possible because the state requires low-income housing developers to locate in opportunity zones to obtain the credit. These projects have been made only possible by the federal Low-Income Housing Tax Credit. The credit has largely replaced government-owned, traditional public housing over the past three decades. This includes the apartment where Rankin resides. The credit limit was increased by 12.4 percent in Congress’ 2018 appropriations bill. It will remain unchanged until 2021. The increase in Mississippi was approximately $1 million per year, which amounts to $4.1 million. Each credit lasts ten years, making the total funding $41.5 million. Developers sell the credits to financial institutions in exchange for cash equity to help build their projects. The Mississippi Home Corporation is the state’s housing agency. It gathered the additional funding together and gave it to all opportunity zone deals in October. Stewart Rutledge, an Oxford developer, said that the money was funneled into opportunity zone funds by [the home] corporation. This created a pipeline for qualified opportunity zone businesses that would otherwise not exist. Experts note that the opportunity zone incentive alone is not sufficient to stimulate housing development. This tax break is only a small part of the capital structures that developers create to finance their projects. Developers and the opportunity zone fund, which manages the money invested by investors, are responsible for making the math work to ensure that the development is financially feasible. The developer is only indirectly benefitting from the arrangement, as the investor receives the tax break. Five proposals were awarded by the housing agency to be located in opportunity zones in Brookhaven, Jackson, Tupelo and Hattiesburg. According to agency review, $14.5 million is being invested by opportunity funds through tax credits, rather than direct equity input. Rutledge stated that no matter how the project is executed, the end result will be dollar bills being sent into these communities. In two years, 293 affordable housing units will be built in opportunity zones by developers. These developments would not have been possible without them, but they may have been constructed elsewhere. Scott Spivey (director of the home corporation) said, “I don’t know if the opportunity funds will fundamentally change the face affordable housing,” “If this is a tool that has been carved out by legislation and presented to economic developers, housers and everyone else, then we should at least try it. Because if not, we aren’t making a difference.” Rutledge submitted an application to build a 42-unit complex in Vicksburg, less than one mile from the mill. He said that he wouldn’t have chosen the location if the home corporation had not required it. He said that he would have chosen to live in Starkville, Oxford and Desoto, which are all growing communities located just north of Vicksburg. Rutledge stated that he would consider submitting his plan again during the next round of housing tax credit grants. However, Rutledge was not selected by the agency. Ben Washington, director at the Vicksburg Housing Authority which manages the apartments where Rankin resides, said, “That’s going be the best opportunity for the Kings area to enjoy affordable housing.” In the next round, the home corporation will not require that proposals include opportunity funds. However, it will award additional points to projects located within opportunity zones. A family of four living in Vicksburg would need to make $32,880, which is 60 percent of the area’s median income. The maximum they could earn in rent for these low-income apartments is $855 for a three bedroom. Workers earning less than the income limit have an affordable housing gap. Spivey stated that Vicksburg has 15 low-income housing complexes, all of which are funded by housing tax credits. These complexes are responsible for the majority of affordable housing developments built or renovated today. None of these are in Kings. Although it might not work out, experts believe that the combination of low-income housing tax credits and opportunity zone funds will attract social-minded investors into poor Mississippi communities. This is likely due to the increased awareness about these types of deals. Rankin stated that she is unhappy in her subsidized apartment and feels unsafe for her children. Rankin’s rent is based upon her income. Recent employment changes have caused her rent to rise from $100 to $300 in December. She said, “How can you help me get out of this mess if every dollar I make you take fifty cents?” According to the National Low Income Housing Coalition, Rankin would need to find a job that pays her $18.04 an hour — more than $5 per hour more than she currently earns — to pay the $938 rent for a Warren County three-bedroom apartment. Washington admitted that Rankin could find a better-paying job due to the scarcity of affordable housing. However, she would not see significant changes in her housing situation. He said, “Because she’s not sure where she is going at that point.” Rankin stated that she believes the opportunity area will have minimal impact on Kings, the low-income community that is eligible for tax cuts. Rankin stated, “I don’t know anyone down here who works in that plant.” “The opportunities passed us.” The Center for Public Integrity, a non-profit investigative news organization, is based in Washington, D.C.