New Chattanooga Tax Credits Could Invite Crony Capitalism

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Hamilton County officials are handing out federal tax credits to investors and other developers so they’ll spruce up blighted areas, but some people worry politicians will only give these credits out to friends and political donors.

Government bestowing preferential treatment upon certain businesses — but not others — is called crony capitalism.

In this case, county officials decide who gets what for what are known as Opportunity Zone tax credits.

According to the Chattanooga Times Free Press, these Opportunity Zone tax credits allow investors to avoid capital gains taxes if they invest their capital gains in zones designated as distressed or blighted.

Exactly 743 low-income census tracts qualified statewide. Hamilton County Mayor Jim Coppinger selected 17 census tracts for his area, which Tennessee Republican Gov. Bill Haslam approved, according to the paper.

Davidson County got 18 Opportunity Zones. Shelby County got 32.

No one in Coppinger’s office returned The Tennessee Star’s requests for comment this week, but the Times Free Press said he had a tight deadline to select winners.

Helen Burns Sharp of the Chattanooga-based Accountability for Taxpayer Money said the potential for cronyism is “as clear as can be.”

“This enterprise zone designation, yes, when you start looking at who the players are and who the sites are, these are people who are well connected politically,” Sharp told The Tennessee Star.

“Has any money changed hands or has anything been going on under the table? I hope not, but that has been one of my themes from time to time. Crony capitalism.”

Furthermore, Coppinger selected areas for Opportunity Zones that developers were already interested in, Sharp said. Thus, they needed no government incentives to invest. The areas that lost out, Sharp went on to say, got shortchanged, as did the wishes of the people who live there.

“I think if you had called one of the neighborhood representatives in one of these lower-income areas and asked him or her for a 2 o’clock meeting then they would have asked whether to meet in the a.m. or the p.m.?” Sharp said.

“They would have been there. It didn’t mean you had to invite every low-income person in that census tract. But county officials only had a few key players representing the financial community.”

According to the Times Free Press, government officials apply the Opportunity Zone tool without measuring objectives or studying effects.

The potential for cronyism can happen anywhere, Sharp said.

“I don’t think Chattanooga’s situation is unique.”

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Chris Butler is an investigative journalist at The Tennessee Star. Follow Chris on Facebook. Email tips to [email protected]





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