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“I have a passion for amplifying the voices of those in our state that need the most help.”Anna Wolfe, investigative reporter
‘One thing begets the next’: Trump officials declared his tax cut a boon for poor Mississippi communities, but promises of affordable housing remain elusive
By Anna Wolfe and Allan Holmes | December 9, 2019
This story was co-published with the Center for Public Integrity.
Under President Donald Trump’s plan to pump money into poor neighborhoods across the country, the government gave generous tax breaks to a Mississippi businessman to purchase a Vicksburg saw mill on the verge of shutting down.
He closed the former Anderson-Tully plant to make millions of dollars worth of updates to the facility; when it reopened, he filled 125 of the mill’s 158 previous positions.
The owner, William Van Devender, had taken advantage of a controversial provision in Trump’s Tax Cuts and Jobs Act of 2017 called opportunity zones, which offer incentives for businesses and developers to make long-term investments in economically distressed communities.
Mississippi officials have heralded the deal an “American success story,” according to the New York Times. Vicksburg Mayor George Flaggs credits the opportunity zone with saving jobs, which makes the city a national model for the program. “It’s a matter of putting bread on the table,” he said.
Leaders promise the incentives will bring employment and affordable housing to the designated communities, so the benefits will reach not just wealthy investors but workers such as Tiffany Rankin, a public school bus driver who lives in the Vicksburg opportunity zone.
Rankin was looking for a better job when the plant, now called Vicksburg Forest Products, changed ownership. She said she applied for several openings but couldn’t secure one.
“What’s the purpose of you building businesses and building houses if no one can afford to live in them?” Rankin said. “Or you can’t afford to go and patronize with this business because you don’t have any money left?”
The condition of Rankin’s neighborhood — a poor, flood prone community called Kings — is how the area qualified for tax breaks.
Both Rankin’s apartment and the plant are located within one of 8,700 census tracts local governors selected and the Treasury Department certified as opportunity zones in 2018.
Rankin echoes concerns from opportunity zone critics who say the provision could leave behind the most vulnerable people living in these communities.
“Nothing in the federal law steers money to the areas that need it the most or projects that would have the most benefit for low-income people,” said Samantha Jacoby, senior tax legal analyst for the Center on Budget and Policy Priorities, a nonpartisan Washington, D.C.,-based research institute.
A tract is eligible if the median family income of the area is less than 80 percent of the state median or if the poverty rate is over 20 percent. Mississippi chose 100 opportunity zones out of 400 eligible tracts.
Investors who move money they previously earned through the increasing value of an asset, such as stocks or real estate, into opportunity zone projects will be able to delay and reduce the taxes they have to pay on those capital gains. After ten years, the investor pays zero taxes on any new capital gains realized through the opportunity zone project.
Emails obtained by Mississippi Today show Van Devender, who has donated to campaigns for Trump and Gov. Phil Bryant, applied for the saw mill to be designated an opportunity zone in March of 2018, the month the sale was announced and two months before it finalized.
The Kings community drives the poverty in its 4,664-person census tract, which is otherwise wealthier than the average Mississippi community. The median family income is $66,491 compared to $52,689 statewide, according to 2017 census estimates. But the poverty rate is 26 percent — up from 16 percent in 2015 — compared to the state’s 21.5 percent rate.
Rankin lives in Kings, just north of downtown Vicksburg in a public housing complex adjacent to the plant. She earns $12.70 an hour as a bus driver, a job she works between 25 and 30 hours a week while raising three teenagers. After taxes, retirement and several hundred dollars in health insurance premiums, Rankin said she usually pulls around $700 a month in take home pay.
Previously, she worked for eight months at a plant 20 minutes away, sometimes working 12-hour shifts well into the evening.
“It’s hard. Because either you have to choose between, ‘Ok, well we have enough money to do this,’ and then your children suffer. Or I can give them everything that they need emotionally but not financially.”
The saw mill job, she hoped, would at least pay more. Plus, the plant is so close to her apartment, she could walk to work if her car broke down. Maybe then she could afford to move out of her apartment — where she says high utility bills offset the low rent — and buy her own home. But she never got the job.
That doesn’t mean she’s not benefiting from the development, officials like Flaggs argue. The mayor points to the Texaco gas station, one of the only stores in the neighborhood, which he believes is supported by the local job market.
“Anything industrial improvement [enhances] any community, when you’re creating jobs, in the surrounding. There’s a Texaco convenience store up there. And you have to have gas. You have to have food going back and forth,” Flaggs said.
Workers at the saw mill, such as Truck driver Charles White, often visit the gas station during their lunch break for frozen pizza or hot dogs.
In August, the plant hired White, who owns a home with his wife in the Warrenton community south of Vicksburg. After spending long days and nights on the road operating his own trucking company, White took the $14.50-an-hour saw mill job for the stable hours that allow him to spend more time with his daughter.
“I don’t think the pay is adequate enough for me to actually take care of my family like I think I should be able to,” White said.
In Mississippi, sawing machine operators and industrial truck and tractor operators, some of the occupations represented at the plant, earn average salaries of around $30,000 each.
That’s about $8,000 more than the estimated household income of the average renter in Warren County, according to the National Low Income Housing Coalition, but the wage is still not enough to reasonably afford the average market-rate rent for a three-bedroom apartment.
Housing and Urban Development Secretary Ben Carson visited Vicksburg last December to celebrate what he called one of the first opportunity zone developments. He later said the saw mill investment had led to affordable housing development around the plant.
“As a result of that, builders came in and started building houses for the employees. That’s the way that it works. One thing begets the next,” Carson told a Bloomberg News reporter in March.
But a review of Vicksburg building permits reveals no such projects had happened.
Van Devender, the saw mill’s new owner, told Mississippi Today he was unaware of any developments spurred by his investment in the plant and that his company is not mandated to develop housing.
“We don’t know anything about it,” Van Devender said, adding that his employees “make enough money to afford good housing.”
“So if they’re having an issue there’s another problem out there.”
Even if not occurring in Vicksburg, the promise of low-income housing coming to opportunity zones in Mississippi does not fall fully flat.
The state has ensured it will happen by compelling low-income housing developers, whose projects are only viable because of the decades-old federal Low-Income Housing Tax Credit, to propose developments within opportunity zones in order to get the sought-after credit. Over the last three decades, the credit has largely replaced traditional, government-owned public housing, such as the apartment where Rankin lives.
In its 2018 appropriations bill, Congress increased the credits by 12.4 percent until 2021. In Mississippi, the increase totaled about $1 million a year for a total of $4.1 million; each credit lasts for ten years, so the funding totals $41.5 million when all said and done. Generally, developers sell the credits to financial institutions, which reduces the company’s tax bill, in exchange for a portion of the cash equity they need to build their projects. The Mississippi Home Corporation, the state’s housing agency, lumped the additional funding and awarded it all at once to opportunity zone deals in October.
“Because this money was directed into opportunity zone funds by the home [corporation], it created a pipeline of qualified opportunity zone businesses that otherwise would not have existed,” said Oxford developer Stewart Rutledge. “When these opportunity zone funds are trying to be formed … they can point to this pipeline and say, ‘Hey, we’ve got places for your money.’”
But the opportunity zone incentive is not enough by itself to spur this housing development, experts note.
That tax break is a small contribution to the capital structures developers create to fund their projects. It’s up to the developer and opportunity zone fund — which manages the money investors put in — to make the math work so that the development is financially viable. The tax break, then, goes to the investor, with the developer only indirectly benefiting from the arrangement.
The housing agency awarded five proposals inside opportunity zones in Richland, Jackson, Tupelo, Hattiesburg and Brookhaven. Opportunity funds are investing $14.5 million, mostly through the purchase of tax credits as opposed to direct equity input, according to the agency’s review of the proposals.
“No matter how it gets done, the end result is dollar bills going into those communities,” Rutledge said.
Two years from now, developers will have built 293 affordable housing units in opportunity zones — developments that would have happened regardless, but may have otherwise been located elsewhere.
“I don’t know whether or not the opportunity funds are going to fundamentally change the face of affordable housing, but we’ve got to give it a shot,” said Scott Spivey, director of the home corporation. “If that’s a tool that’s been carved out in legislation and it’s been presented to economic developers and housers and everybody else, we have to at least try to use it. Because if we don’t, we’re not making a difference.”
Rutledge submitted a proposal to build a 42-unit complex in Vicksburg less than a mile from the mill, a location he said he would not have chosen had the home corporation not required it. “I would have gone to like Starkville, Oxford, Desoto,” he said, which are growing communities hours north of Vicksburg.
The agency did not select his proposal but Rutledge said he will consider resubmitting the plan during the next regular round of housing tax credit awards.
“That’s going to be the best chance for the Kings area to experience affordable housing,” said Ben Washington, director of the Vicksburg Housing Authority, which manages the apartments where Rankin lives.
The home corporation won’t require proposals include opportunity funds — extra work for the developer — in the next round of credits, but will still award extra points for projects located in opportunity zones.
To qualify for one of these privately-built low-income apartments, a family of four in Vicksburg could make no more than $32,880 — 60 percent of the area median income — and the most they would pay in rent is $855 for a three-bedroom. An affordable housing gap exists for workers who earn just over the income limit.
Vicksburg is home to 15 low-income complexes funded by the housing tax credits, which are responsible for the vast majority of affordable housing developments being built or refurbished today, Spivey said. None of them are located in the Kings community.
Pairing Low-Income Housing Tax Credits and opportunity zone funds might prove to be a mismatch, but experts hope the attempt will bring social-minded investors to poor Mississippi communities — if only as a result of the increased awareness surrounding these kinds of deals.
Meanwhile, Rankin said she feels stuck in her subsidized apartment, an environment she views as unsafe for her children. Rankin’s rent is based on her income and due to recent employment changes, her rent is set to increase from $100 to $300 in December.
“How are you helping me to get out of this situation if every time I make a dollar you take fifty cents?” she said. “To me, it’s like a trap to where you have to depend on this.”
Rankin would have to find a full-time job that paid her $18.04-an-hour — over $5 an hour more than she earns now — to afford the $938 rent for a three-bedroom apartment in Warren County, according to the National Low Income Housing Coalition.
Washington acknowledged that, because of the lack of affordable market rate housing, a person like Rankin could secure a better paying gig and not see any significant improvements to her housing situation. “Because where is she going to go at that point?” he said.
Rankin said she believes the opportunity zone will have little impact on Kings, the poor community that makes the area eligible for tax breaks.
“I don’t know anyone who lives down here who works at that plant,” Rankin said. “The opportunities passed us.”
The Center for Public Integrity is a nonprofit investigative news organization based in Washington, D.C.