Politics & Government

Opportunity zones program about to be tested in South Carolina

South Carolina Gov. Henry McMaster applauds a guest while delivering his state of the state address at the South Carolina Statehouse in January.
South Carolina Gov. Henry McMaster applauds a guest while delivering his state of the state address at the South Carolina Statehouse in January. AP

Sen. Tim Scott’s new federal program encouraging businesses to invest in low-income communities will soon be tested around the country, but the stakes for the South Carolina Republican might be highest in his own state.

The home turf scrutiny could begin as early as Friday morning.

That’s when South Carolina Gov. Henry McMaster will hold a press conference in Ridgeway, S.C. — in the shadow of the shuttered V.C. Summer nuclear power plant that cost the area nearly 5,000 jobs last summer — to reveal which of the 135 communities in the state he recently recommended the Treasury Department formally designate as so-called “opportunity zones.”

Once the Treasury Department approves the recommendations — a formality at this point — McMaster and Scott, both Republicans, expect businesses to start investing in the designated zones to boost economic advancement, lured by the promise of receiving certain federal tax breaks in exchange for remaining in the communities for at least 10 years.

The list of zones, obtained first by McClatchy, are spread out across the entire state. Ninety-six of them qualify as urban areas. All were selected based on certain criteria laid out in the Republican tax bill passed at the end of last year, which included Scott’s opportunity zones initiative.

The Republican tax bill that put the opportunity zones program into law mandates governors can only choose 25 percent of eligible distressed communities in each state. Accordingly, McMaster designated the highest possible number.

Rep. Jim Clyburn, a member of House Democratic leadership and the only non-Republican in the state’s congressional delegation, said he would have put more stipulations in place to ensure governors don’t pick localities that might not need assistance as desperately as others.

“(Scott) puts us in the business Republicans say we should not be in, and that is in the business of picking winners and losers,” said Clyburn, who has a few opportunity zones flagged for his district.

McMaster and Scott told McClatchy Thursday afternoon that the proposed zones were selected after soliciting buy-in from community leaders and elected officials in the state and in Congress. Nobody got everything they asked for, but McMaster said everybody who made a specific request got at least their first or second choices.

Rep. Ralph Norman, R-S.C., won designation of opportunity zones in all but one of the four eligible communities in Fairfield County, where the power plant closed.

Rep. Tom Rice, R-S.C., who represents Dillon, Marion and Marlboro Counties that make up the state’s so-called “corridor of shame,” also convinced McMaster to designate opportunity zones in some areas in his district.

Scott said he had a chance to offer input on McMaster’s proposed list of opportunity zones before the governor’s office made the submission to the Treasury Department, which gave him the chance to ensure that North Charleston made the cut. That’s where Scott grew up below the poverty line in a single-parent household, an experience that has inspired his legislative agenda on Capitol Hill.

Though Scott has a personal interest in seeing the opportunity zone program thrive in South Carolina, McMaster is also eager to take credit for implementing the initiative effectively and seamlessly.

Having ascended from the lieutenant governor’s post last year after then-Gov. Nikki Haley was confirmed as United Nations Ambassador, McMaster is facing a competitive Republican primary race this summer and a potentially touch general election.

McMaster boasted that he submitted his proposed opportunity zones to the Treasury Department by the March 21 deadline rather than seek the 30-day extension favored by most other governors. And he closely associated himself with Scott, one of the state’s most popular elected officials.

Back in Washington, Brett Theodos of the Urban Institute, a research group, has been studying the opportunity zone program closely since its conception. He says it could end up being the nation’s largest economic development program but the broadly-written statute doesn’t necessarily prevent designations of opportunity zones in areas that might be on the verge of gentrification.

He and his team released an exhaustive data set this week, using metrics relating to single-family, multi-family, small business and commercial lending to equate a numerical value to each potential zone that shows how many resources an area has already received.

Theodos cautioned the data does not take into account certain conditions in communities that would make an area more needy than it might appear. But some areas McMaster has flagged for opportunity zone designation have numbers as high as “10,” which might suggest the zones don’t need extra help. Other areas fall below a “5.”

Few areas in Charleston County, where the economy has been booming in recent years, were designated as opportunity zones in McMaster’s plan, a sign there was sincere sensitivity to need. McMaster also did not appear to have selected opportunity zones corresponding with those the Urban Institute flagged separately as being especially vulnerable to gentrification.

Though he wasn't elected, Henry McMaster was sworn in as Governor of South Carolina after former Gov. Nikki Haley became U.S. Ambassador of the UN. Here is what we know of McMaster's policies since he took office.

Emma Dumain: 202-383-6126, @Emma_Dumain

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