Trump’s Unsupported Claim About Opportunity Zone Investments

At his rally in Tulsa on June 20, President Donald Trump asserted without evidence that $100 billion had been invested in opportunity zones under a federal program that provides tax incentives to encourage development in low-income neighborhoods.

That number is far higher than other estimates of the total, and Trump, his administration and his campaign have furnished no evidence to back up the claim.

Trump, June: 20: And I worked closely with a great senator … Sen. Tim Scott, South Carolina, to create opportunity zones, which are doing incredibly. And since then countless jobs and $100 billion of new investment, not government investment, have poured into 9,000 of our most distressed neighborhoods anywhere in the country.

The president repeated the claim in a speech three days later in Phoenix:

Trump, June 23: And we created opportunity zones, along with Tim Scott. And since then, countless jobs and $100 billion of new investment have poured into 9,000 of our most distressed neighborhoods in the country.

We asked the Trump campaign, the White House, the Treasury Department and the IRS for support for the president’s assertion. The campaign referred us to Treasury, which did not respond to our inquiries. An IRS spokesperson said the agency would get back to us, but it didn’t. We never heard back from the White House.

The total investment is difficult to ascertain; there is no complete public list of all such investments.

The firm Novogradac maintains a list of voluntarily disclosed opportunity zone investments. It reported on April 29 that the total had surpassed $10 billion, and the actual total was “likely significantly more than that.” The firm said almost all of the money was invested before March 13, when Trump declared a national emergency to combat the spread of the novel coronavirus.

The Urban Institute, in a report issued in June, cited investment of “at least $10 billion.”

John Lettieri, president and CEO of the Economic Innovation Group, which has long championed opportunity zones, laughed when we asked him about Trump’s $100 billion figure. “I’m pretty sure no one knows where that number comes from,” he told us.

He estimates that the total is in the $25 billion to $30 billion range, which in his view is not bad for a relatively new program whose rules weren’t finalized until late last year. “It’s worth celebrating, but it’s important not to be triumphalist,” he said. “This is very much a work in progress.”

The National Council of State Housing Agencies maintains an Opportunity Zone Fund Directory. As of June 1, it listed 213 funds with a total of $47.2 billion in anticipated total investment –anticipated, not actual investment.

So where does Trump’s $100 billion projection come from? Probably from the Treasury Department. Secretary Steve Mnuchin used the figure in the fall of 2018 in announcing proposed regulations for the program and in an interview with The Hill newspaper.

Mnuchin, Oct. 19, 2018, press release: We anticipate that $100 billion in private capital will be dedicated towards creating jobs and economic development in Opportunity Zones.

But that’s $100 billion over the life of the program, which expires at the end of 2028.

Trump, who has often touted opportunity zones to show how much he is doing for the Black community, has used the $100 billion figure before, but as a projection, not something already achieved.

Trump, April 17, 2019: Secretary Mnuchin estimates that private businesses will invest $100 billion in opportunity zones, and that’s going to be in a fairly short period of time.

And 18 months ago:

Trump, Dec. 12, 2018: The Treasury Department has estimated that, as a result of these tax incentives, private businesses will invest $100 billion in opportunity zones. And that will be incredible.

Opportunity zones were created under the 2017 Tax Cuts and Jobs Act, which was signed into law by Trump on Dec. 22, 2017. The zones, designed to bring development to largely low-income areas that otherwise would have trouble attracting it, had long been pushed by Sean Parker, the founding president of Facebook and the co-founder of the music file-sharing service Napster. The zones were enthusiastically backed by Sens. Tim Scott, Republican of South Carolina, and Cory Booker, Democrat of New Jersey. Their legislation was folded into the tax cut bill.

Here’s how the zones work: In the summer of 2018, the Treasury Department earmarked 8,766 census tracts nominated by governors and the mayor of the District of Columbia as opportunity zones. Combined, the areas have a poverty rate nearly twice the national average.

Those who invest in projects in those zones get a double-barreled tax break. First, the law permits investors to defer capital gains taxes for up to seven years on money they invest there. Second, if the investors hold onto the opportunity zone investment for 10 years, they don’t have to pay any capital gains taxes on that investment.

While it is admittedly early in the process, the Urban Institute took a look to see how things are going so far. It found some upsides but also some problems. The report said the research “included about 70 in-depth interviews with project sponsors; fund managers; investors; wealth managers; developers; philanthropies; and public and nonprofit agencies working with OZs, such as community development intermediaries, state OZ program offices, and city-level OZ coordinators.”

On the upside, the report said, the zones “are helping spur the evolution of a new community development ecosystem, engaging both project developers and investors who have limited historical engagement in community development work.”

But it also found that it was easier to find investors for high-profit developments than for enterprises that would help the community.

“As OZ incentives are not structured to encourage resident or community engagement, mission-oriented projects struggle to compete for attention with higher-return projects–for which OZs provide much larger subsidies because of the design of the incentive,” the report said.

It added, “Although OZs were designed to spur job creation, the vast majority of OZ capital appears to be flowing into real estate, not into operating businesses.” That’s contrary to Trump’s claim that the program has created “countless jobs.”

But on a brighter note, the Urban Institute report said many observers found the program “elevates the visibility of neighborhoods and deals that investors might not have considered otherwise.”

A New York Times investigation of the program last November found “the Trump administration’s signature plan to lift [cities] — a multibillion-dollar tax break that is supposed to help low-income areas — has fueled a wave of developments financed by and built for the wealthiest Americans.” The article spotlighted luxury developments backed by big celebrity developers and help for projects already in the works.

But the article also cited projects helping the intended targets, like one in Birmingham, Alabama, in which a long-vacant building was being recast as apartments for local residents.

Lettieri sees signs of hope in places like struggling Erie, Pennsylvania, where he says officials are using the tool in conjunction with local development strategies. He declares himself “cautiously optimistic.”

So, it’s way too early to determine the success of the program, and the pandemic has put things on hold. But one thing is clear: Trump has produced no evidence that $100 billion has been invested in opportunity zones and no support for his claim that it has created “countless jobs.”