A $15 million hotel, a $16 million apartment complex and a $9 million affordable housing project are in the works in South Carolina as investors begin making investments under new federal tax guidelines.
“This program can engineer growth in the state,” said Mark Elliott, managing partner of the Greenville-based South Carolina Opportunity Fund, which is making those investments. “Already, we’ve got about $200 million worth of projects lined up thus far in South Carolina” — from the Upstate to the Midlands.
More than 200 S.C. investors, developers, business and civic leaders gathered in Columbia on Friday to discuss strategies to revitalize poor S.C. communities.
Headlined by Gov. Henry McMaster and U.S. Sen. Tim Scott, R-Charleston, the summit focused on a new community development initiative passed by Congress as a part of the Tax Cuts and Jobs Act of 2017. The tax incentive is designed to encourage long-term private investments in communities left behind by the recent national economic expansion.
Sponsored by Scott, the “opportunity zones” allow investors who direct money into low-income rural and urban areas that are starved for economic activity to defer taxes on their capital gains for up to 10 years.
“This is a phenomenal way for us to invest our resources in a way that does good and gets a good return,” Scott said of the tax breaks.
Earlier this year, McMaster announced the submission and approval of 135 Opportunity Zones in South Carolina by the U.S. Department of Treasury. He said the zones will help promote the economic competitiveness of communities in every corner of the state.
The zones are spread out across South Carolina, including 96 that qualify as urban areas.
Luring investors to poor, rural areas will require joint ventures and partnerships among neighboring counties to pool added local incentives, said Walter Davis, founder of Peachtree Providence Partners.
And it will require state leadership, added Elliott of the South Carolina Opportunity Fund.
McMaster, for example, wants the Legislature to spend $100 million to allow the S.C. Department of Commerce to focus on bringing new jobs and investment to 28 of the state’s poorest school districts.
“If we can get rural South Carolina cooking as some of the other areas (in the state are, that) will be a great thing,” McMaster said.
Proponents say the zones could spur development of affordable housing, and support new and expanded business and retail development in underserved areas.
Critics worry the tax breaks will prove a subsidy to displace poor residents in already gentrifying, up-and-coming areas, not help more troubled ones. They also fear money will concentrate in high-cost cities and benefit wealthy real estate developers, not local start-up businesses.
“Most places that are poor are not in danger of displacement from gentrification. They’re in danger of displacement from decline,” said John Lettieri, chief executive at Economic Innovation Group, a bipartisan Washington, D.C.,-based group that worked with Scott to draft the legislation.
“They’re areas with excess housing and excess industrial capacity and hollowed-out downtowns,” Lettieri said. “These are the things opportunity zones were designed to address, and we’re already seeing that take place,” in Maryland, Pennsylvania and elsewhere.
Republicans are battling perceptions the program is a hastily conceived handout to the rich, following reports that President Donald Trump, his son-in-law and senior adviser Jared Kushner, and Trump friend Richard LeFrak have business interests in Opportunity Zones.
The Treasury Department also is still in the process of writing regulations that will govern parts of the program.
Despite some flaws, the zones present an opportunity to attract capital to neglected areas, Columbia Mayor Steve Benjamin, a Democrat, has said.
For example, Meeting Place Church of Greater Columbia and Spotlight Cinemas remodeled and reopened the former Capital 8 cinema earlier this month.
The theater is in a building that had sat vacant for nearly a decade. It is located in an S.C. Opportunity Zone on the church’s 23-acre strip-mall site, south of Columbia Place Mall.
Scott, who grew up in a single-parent household in North Charleston mired in poverty, has traveled the country on an “Opportunity Tour” to visit designated zones and meet with community, business and local government leaders.
“Our nation is the nation that has redefined poverty for the world,” he said. “If we are going to continue to be that nation, we are going to have to have a compassionate form of capitalism deployed for our most vulnerable citizens who are working paycheck to paycheck.
“(I)t will require us to take a second look at areas ... where hope seems to vanish like a vapor.”