I had the opportunity to be on Biznow’s panel last week on Opportunity Zones, a feature of last years tax reform legislation at the federal level that is supposed to encourage investment in areas struggling economically. I made the point that wound up in the headline of the story: Opportunity Zones Expose Conflict Between Growth Advocates And Neighborhood Leaders. The creation of the zones provoke the ongoing question about whether the lower costs of reducing taxes on development there will end up getting lost when neighborhoods and other interests put their hands out for exactions from new projects. Not only that, Seattle’s seriously slow and expensive permitting process doesn’t help. In spite of evidence that the City is trying to expedite permits for Opportunity Zone projects, I’m skeptical that they an make it happen. And more importantly, if we’re in a “housing crisis” why isn’t the City expediting ALL permits for housing projects.

What is an Opportunity Zone? Here’s the answer from the Internal Revenue Service the agency that manages the program:

An Opportunity Zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as Opportunity Zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service.

Here’s the exchange I had about non-profits, unions, neighborhood groups that are sure to want some pay out from developers building in zones:

“You are coming into our house,” Seattle Chinatown International District Preservation and Development Authority Executive Director Maiko Winkler-Chin said. “You have to be willing to listen to what we want.”

Listening is fine, Seattle For Growth Director Roger Valdez said. But the rules have to be reasonable. He said the bureaucratic quagmire surrounding the city’s development process is bogging down growth at a time when Seattle needs it.

Of course, I was the wet blanket in the room. Everyone there was running numbers in their head and working out how the program could get their projects across the finish line or spark some new investment in proposed projects. My point was that the financing might be perfect, even optimal because of reducing tax obligations promoting investment. But if that value has to paid out in the form of wage requirements, community benefit agreements, design review, and glacial permitting timelines, then the program will grind to a halt.

I think Winkler-Chin and her colleagues are just doing their job and standing up for their community. It makes sense to me that if a project is coming into the International District that her organization would want some of the value created. The problem is that the people at City Hall don’t do math; the City Council are more than happy to cave to demands for “social justice” that eat up the benefit of the upsides in a zone. And if the project gets hit with protests or lots of negative press, then what was supposed to be an opportunity ends up being just another project in Seattle, expensive, taking for ever to complete, and diminished in it’s potential to increase housing supply with constraints production. As the President says, “We’ll see what happens.”