PIE IN THE SKY
Cross Bayou project not worth it
If there was ever a pie-in-the-sky idea, cut me a slice of this one: A $1 billion, mixed-use development of Cross Bayou on the north side of downtown Shreveport.
As you may have heard, the development includes a new state office building, but leaves an empty state office building behind – just two miles away – along with the annual maintenance and security costs of an empty building. That will just get added to the millions of tax dollars we already spend each year on vacant state buildings, though.
And then there are the plans for constructing a new charter school, even though more than one-half of Caddo Parish schools have about 100 fewer students enrolled than they should (based on enrollment capacity), not to mention that moving students out of Caddo Parish public schools (and into a new charter school) will most likely cause some schools to shut down or be consolidated.
And then there are plans for a 5,000- unit, mixed-use housing development, even though 10 percent of all apartments in Shreveport-Bossier City are vacant, and the cost of building a single-family home in Shreveport or Bossier City was more affordable last year than in any year since 2011.
So, with all that said, why would anyone, or any group, commit to borrowing and spending (including some money from you and me as taxpayers) $1 billion in a declining, impoverished area?
You see, as it turns out, it’s because the federal government will subsidize (at least at first) most of the cost – and they’ve been doing this across the country since the Tax Reform Act of 1986. But it’s not that simple to explain the rush to develop Cross Bayou right now.
So let’s get caught up first. You see, the Tax Reform Act of 1986 created something called the Low-Income Housing Tax Credit. That credit allowed each state to dole out almost $8 billion per year in federal tax credits (to whomever state officials wanted) for anyone investing in the “acquisition, rehabilitation or new construction of rental housing targeted to lower-income households.” Whether any of that actually made housing more affordable or not for low-income families, that’s another discussion altogether, but for now, just know that if you wanted federal tax credits to build your lowincome housing project, all you had to do was ask the state.
But when President Trump signed the Tax Cuts and Jobs Act of 2017 bill last December, those federal tax credits for low-income housing properties (originally put in place in 1986) weren’t nearly as valuable to investors anymore (or to the banks who often buy such properties for their own portfolios). After all, President Trump had just cut the corporate income tax rate from 35 to 20 percent, essentially providing the tax savings incentive without all the extra work of a low-income housing development.
So, what happens now if the federal government has essentially taken away the tax incentive for building low-income housing? Well, to make sure there was no disruption to the construction of lowincome housing throughout the country, the Trump tax bill included something called “Opportunity Zones” for investors. And guess where Cross Bayou is located? You guessed it – inside one of those zones.
Now the idea of the “Opportunity Zones” is pretty straightforward: The federal government will allow investors to avoid the usual tax on their capital gains, if the investor will spend their storedup capital gains on projects intended to transform blighted areas into thriving economic hubs.
However, the most comprehensive report on this idea studied 75 similar “opportunity zones” in 13 states, and they concluded such tax incentives had “little or no positive impact” on economic growth in the surrounding communities.
In fact, they found that pushing people to live in any particular spot (like Cross Bayou) does more for well-connected businesses than for the poor people living in those declining areas.
Even the Journal of Real Estate Economics found the poor end up with only about a savings of 25 cents on the dollar in terms of lowering housing costs in these “zones,” while the investors and their “intermediaries” picked up 75 cents on the dollar instead. In fact, a study from the University of Waterloo found that such “affordable” housing developments generally end up making it too expensive for many people to live in.
The bottom line about this proposed Cross Bayou project is this: Yes, building affordable housing is important – too many Americans already spend more than half their incomes toward rent. But when you have to leave a state office building “for dead” on Fairfield, and then close or consolidate a few Caddo Parish schools without making housing any more affordable than before you started, then maybe this project is important for all the wrong reasons.
Dishing up this pie-in-the-sky is tempting, though. It just doesn’t seem to be worth the “calories” this time.
Louis R. Avallone is a Shreveport businessman, attorney and author of “Bright Spots, Big Country, What Makes America Great.” He is also a former aide to U.S. Representative Jim McCrery and editor of The Caddo Republican. His columns have appeared regularly in The Forum since 2007. Follow him on Facebook, on Twitter @louisravallone or by e-mail at firstname.lastname@example.org, and on American Ground Radio at 101.7FM and 710 AM, weeknights from 6 - 7 p.m., and streaming live on keelnews.com.