In the aftermath of Hurricanes Katrina and Rita, George W. Bush approved a sweeping and lucrative package of developer-ended tax incentives. HR 4440, also known as the Gulf Opportunity Zone Act. President Bush spoke about the Go-Zone Act on the day he signed it into law in December 2005. He said:

Today, I’m going to sign the Gulf Opportunity Zone Act of 2005. It’s a step forward to fulfill this country’s commitment to help rebuild. It’s going to help small businesses, is what it’s going to do. For small businesses in the affected area, the GO Zone will double expensing for investments and new equipment from $100,000 to $200,000.

The bill also provides a 50 percent bonus depreciation, and that means tax relief for small businesses that — and businesses that purchase new equipment and build new structures. In other words, this tax act provides incentives for people to move forward. And as these businesses move forward, they’re going to need to employ people. So this is a tax bill that has got employment consequences to it. This is going to help the entrepreneurs of Louisiana and Mississippi and Alabama, entrepreneurship creates opportunity, which creates job.

This is just part of our plan to help the people get back to work. We’ve got to help workers get the skills they need. I just met with a group of concerned citizens from business and labor and education, all aspects of society. Again, I want to thank you all for being there. We’re talking about how to help put together a strategy that takes advantage of the jobs that are going to be created down there to make sure there’s a skill set match. We’ve got a lot of people that want to work, and yet they may not all be electricians or plumbers. And so one of the real challenges and opportunities we have is to match willing worker with jobs which will actually exist. And that’s what we’re talking about and strategizing about.

Most of us here in Louisiana assumed that the Go-Zone Act was intended to help redevelop portions of the State devastated by the hurricanes. Thousands of people lost their homes, and there was a documented and immediate need for new housing in the region. In Louisiana, the Gulf Opportunity Zone was designated for the following areas:

Of the 64 parishes in the State of Louisiana, 37 of them were eligible for at least “some” of the provisions of the Gulf Opportunity Zone Act. Although many of these parishes suffered direct and significant infrastructrual damage, others did not.

One of the best examples of a parish that did not endure the type of devastating damage that would warrant a federal act incentivizing development is Lafayette Parish. Yet a handful of Lafayette developers are taking full advantage of those incentives in order to build high-end apartment complexes and upper-middle class residential neighborhoods. Though these types of developments may be needed in Lafayette Parish, the incentivization of those developments under the guise of hurricane relief is questionable.

Another prime example of the potential misuse of Go-Zone incentives occurred in Alabama. Oyster linked to a fascinating article by First Draft about a Go-Zone development near the University of Alabama. The developer of these brand new condomiumns near Alabama football stadiums is taking advantage of Go-Zone incentives:

 

This may be nice and convenient for students and alumns of the University of Alabama, but it does not appear to address the intended audience for the Go-Zone Act– the people whose homes were destroyed by the hurricanes. One may argue, “But at least it creates jobs.” Well, so would other, more necessary developments.

 

When you review the Louisiana parishes included in the Go-Zone Act, you may wonder why Rapides Parish is excluded. After all, we received our fair share of damage after Rita and during both hurricanes, Alexandria was the principal dispatch location for disaster relief, yet Sabine, Evangeline, and Vernon Parishes are included in this Act. If anyone could shed light on our exclusion, please feel free.

 

Regardless, there is evidence that Go-Zone incentives are being unnecessarily utilized for developments that only benefit the wealthy, while cutting costs for wealthy developers, and this is a cause for concern as Louisiana continues to rebuild.

 

7 thoughts

  1. The exclusion of Rapides parish from the GO Zone leaves a big question for Rodney Alexander: What good is he?

    While his chief-of-staff hits on the office staff, he played lap-dog to Tom DeLay. Too busy on the appropriations committee to get an earmark for his constituents in the GO Zone?

    Don’t send this good-for-nothing back to DC.

  2. Rapides doesn’t deserve to be included. We did not receive the level of dollar per person damage as the other parishes did. Please give me a break! Katrina was nothing more than a big rain storm for us and Rita gave us no more damage than Lilly a few years prior. Those parishes impacted deserve the benefits.

    You act as if Sabine, Beauregard, Evangeline and Vernon are getting some huge benefit. Sabine, Evangeline and Vernon DO NOT QUALIFY for bonds! The employers, if they are lucky to find employees get the wage credits and get some credit for re-establishing their business. Not much else is helping those parishes.

    The problem with the bonds is quite simple – there were no real rules put into place from the start. Mississippi set their program up as first come, first serve. I have a feeling Alabama did the same thing. Her highness is now trying to say she is the final word after the bond commission has been approving projects based solely on an economic impact study, not a cost-benefit analysis. They have no idea if these projects will even bring a benefit to the state nor how much they will wind up costing the state in the long run. Projects like the new hotel near the Jimmy Swaggart Bible College have been approved. Yes, Baton Rouge has been impacted with an influx of persons, but were they seriously impacted like the parishes of Cameron and St. Bernard or Plaquemines where the entire parish is gone???? No! How many projects have been approved for those? Probably none.

    Today’s bond commission has asked for an AG Opinion to determine if the Governor can have a final say on the approval. All this is doing is leading to a lawsuit from those developers who have already gone out and acquired loans and began projects based on their preliminary approval. This whole project is becoming another black-eye for the state.

    An Chronos while you’re complaining about our federal delegation, we have two people sitting on the bond commission – that would be Senator McPherson and Representative DeWitt – maybe you can talk to one of them.

  3. Bird,

    Are we discussing two different redevelopment programs? Please explain the nexus between the federal legislation and the state bond commission.

    For further clarification, I didn’t say (or act?) that Sabine, Evangeline, and Vernon are getting some huge benefit. The post to which I’m making a comment explained that there are areas in Katrina/Rita states whose claims to needing federal GO-Zone assistance are marginal at best. I think Rapides Parish’s claims to needing federal assistance for small businesses are far more substantial than the media reports or the government (whether federal or state) claims.

    I’d be happy to complain about state officials, too. Give me some more explanation and background on the bond commission. Perhaps Cenlamar can also report on state redevelopment projects.

    Heckuva job Kathleen (Ray, Joe, Charlie, etc.)…

  4. The State Bond Commission MUST approve all Go Zone Bonds. That’s what I was referring to Chronos.

    Rapides and Alexandria since it is the MSA needs to be complaining about the following: (1) NOT getting funding through the Louisiana Department of Economic Development for the Small and Emerging Business program. We’re not on the list because we don’t have a sponsor for the program. Go blame the Chamber, the Business League, CAP or any other group working in economic development. Every other MSA in the state is receiving funding for this program. (2) Our Small Business Development Center is housed at Natchitoches wtih NSU. We get a satellite office that you might find someone in 1 time a week. Complain about that. Why does this occur? Again lack of funding. You would have thought with Alexandria being the MSA the main center would have been located here, but at the time LSUA was only a two-year institution. Good luck taking this from NSU now. (3) Lack of small business support. This includes mentors and people working directly with small businesses to make certain they can receive hands on training. Who to blame on this one? Well SCORE – the service core of retired employees has just about been abandoned even before the Chamber transferred the program to the Incubator. The Incubator is full, but not of true companies belonging in an incuator setting. See SBA comment above.

    Now Chronos, does that give you plenty to complain about???? These programs are partially funded through federal and state money. The Incubator has been bailed out at least once in the past year by the City.

    Additionally federal grants for training programs and small business assistance programs go unwritten.

    As far as Alabama using the money for the apartments, this is no different than Baton Rouge using the money to build hotels and other retail centers while New Orleans can’t get housing at an level reconstructed.

  5. Bird,

    You give me plenty more to complain about. I read up on the GO Zone tax-free bonds (the ones I believe you are discussing). Sure enough, as you rightly point out, the state does have the say-so. The convergence between the state and feds is clearer to me. It’s unfortunate that who sets final approval of bonds is in dispute. A pox on both the feds and the state government for not settling that issue in the legislation.

    I think, however, that my original point about Rodney Alexander is only strengthened by what you’ve mentioned in your posts and what I’ve found elsewhere on the Internet. When you get down to it, the federal legislation set up the GO Zone areas and the essential framework for tax breaks and bonds. Senator Joe and Rep. Dewitt really enter into the fray after the President signed the legislation and are limited by federal legislation. Rodney Alexander had his chance to work on the legislation before it was signed into law. He missed his chance. I repeat he’s good for nothing.

    Your discussion of lack of small business support in Rapides and Alexandria, I believe, is related to the GO Zone issue, but really haven’t these been chronic problems for the area long before Katrina/Rita? Yeah, you’re right we should get more money from the LA Dept. of Econ. Dev. We should have a small business development center in Alexandria. The incubator should do exactly what it’s set up to do and new businesses should have the support they need. Indeed the list, which is one of considerable age, of what small businesses in the Alexandria metro area need can go on and on.

    In reference to the origianl article that prompted this discussion, I still feel Alexander failed his constituents living in Alexandria and Rapides parish. As for the failures of state and local officials, you’ve documented them well, and I suggest CenLamar follow-up accordingly.

  6. Chronos-

    YES – the chronic problems re: lack of funding and adequate support for small businesses existed prior to Katrina and Rita and will continue long after New Orleans has achieved whatever level of recovery it is capable of doing.

    I still feel it would have been a challenge for Alexander to prove Alexandria met the criteria for GO Zone funding. The upper parishes are only getting the bare minimum in benefits and had to fight to be included.

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