Future development—namely a $306 million boulevard linking Interstate 490 with the Cleveland Clinic on East 105th Street—through the Fairfax, Kinsman and Central neighborhoods was dubbed the Opportunity Corridor.
The idea for investors to profit off poor neighborhoods began, of all people, with the guy from Napster.
Located on four pages of President Donald Trump’s Tax Cuts and Jobs Act of 2017, opportunity zones, the brainchild of tech billionaire Sean Parker—and other Silicon Valley honchos—were supposedly intended to create a win-win: 8,700 census tracts (64 total in Cuyahoga County), notably distressed and underdeveloped, were re-envisioned as hotbeds of prime real estate potential with shiny tax benefits. Intrigued investors could reduce capital gains taxes over the years, then eliminate them in full by Year 10. In theory, according to a recent analysis by Novogradac & Co., a national tax consulting company, such incentives could increase an investor’s return by as much as 70 percent.
“That $100,000 building that you’ve built? It’s now suddenly worth $125,000,” says Bradford Davy, director of regional engagement at The Fund for Our Economic Future
, a Cleveland nonprofit designed to cull capital together for worthwhile infrastructure projects. “This is a strong private-capital tax incentive we’re talking about here.”
In Cleveland, which contains 48 census tracts deemed eligible for opportunity zone readiness, the benefits for all city residents alike are still in dispute two years after their debut.
In 2017, a newly formed network of public and private partners called Opportunity CLE grouped these tracts into 11 districts, including already prospering parts of the city, like Downtown and the West 25th-MetroHealth Corridor. Future development—namely a $306 million boulevard linking Interstate 490 with the Cleveland Clinic on East 105th Street—through the Fairfax, Kinsman and Central neighborhoods was dubbed the Opportunity Corridor, a 4.9-square-mile project site where, in some tracts, the poverty rate is as high as 87 percent and the median household income is as low as $4,600.
The Opportunity Corridor, a five-year project that will benefit from thousands of dollars in opportunity zone tax deferrals, probably best illustrates this big-picture zoning dilemma: Can wealthy investors eyeing dirt-cheap land build in line with what residents in the community actually need
“This is the biggest challenge that exists,” says Peter Truog, founder of the Opportunity Exchange
, a cataloguer of opportunity zone projects. “It’s still super unclear. There’s no grassroots panels asking, ‘How do you structure [projects] so that there will be community benefits and
appeal for investors?”
Although the pendulum on opportunity zone benefits swings from hints of gentrification to stable progress in commercial deserts (“The Forgotten Triangle” of Central, Fairfax and Kinsman being one), projects have been sprouting, albeit gradually. The 13 made public through Opportunity Exchange include everything from luxury apartments in Little Italy and a rock climbing gym in Ohio City to a $1.3 million demolition of a former FX Fitness in Maple Heights. According to Davy, most of these projects benefited from opportunity zone tax abatements while they were already in
progress rather than before.
Timothy Weaver, professor of urban policy at the Rockefeller College of Public Affairs in Albany, New York.
As for whether these projects would exist, first of all, or not is up in the air. Timothy Weaver, professor of urban policy at the Rockefeller College of Public Affairs
in Albany, New York, says programs like those in the 2017 Tax Act—he alludes to President Bill Clinton’s “empowerment zones” in 1994—have historically allowed for higher-end construction in burgeoning areas rather than “risky” projects in low-income ones.
“There’s a lot of investment happening anyway,” Weaver says. “And do we really think the [investor class] has been really held back by taxes
in the past? I don’t really think so.” When asked about whether the Opportunity Corridor could reach its potential, Weaver is cautious to avoid any false optimism.
possible is that people will get the highest return on their investment,” he said. “The people who aren’t
guaranteed to benefit? Those who can’t afford to pay rent.”
The ‘little boost’ to break ground
For Josh Rosen, opportunity zone profits weren’t mere perks along the way in his latest project. They were the
reason, essentially, his company built where they built.
Fifteen years before deciding to build The Tappan, a 95-unit apartment complex on the southern border of Tremont and Clark-Fulton, Rosen formed Sustainable Community Associates
in 2004 with his partners Naomi Sabel and Ben Ezinga. Founded in Oberlin, where Rosen and company went to college, the company made its first endeavor into socially aware housing development when it renovated a blighted brownfield site formerly host to an auto dealership. Since then, the team has longed to find the sweet spot where, as their website says, “Real estate development can have a positive impact on a neighborhood.”
Opportunity Corridor on East 93rd Street.
In 2018, after rehabbing the vacant Ohio Awning & Manufacturing Co. building on Scranton Road in Tremont, Sustainable Community Associates turned its sights on land across the street. Wanting to build a multi-use structure for workforce housing—almost half of The Tappan is reserved for those making less than $46,000 per year—Rosen and Sustainable Community Associates secured a $12 million opportunity zone equity (half of the Tappan’s full build cost) that will aid it to its grand opening come June 2020.
A “boost” that, Rosen says, was absolutely requisite.
“Without it, we wouldn’t have been able to pull all this off,” he says.
Cognizant of Sustainable Community Associates’ adding to a crowded market of market-rate housing in an economically complex neighborhood (median incomes surrounding it range wildly, from $17,000 to $77,000), Rosen still maintains a forward-thinking mentality considering The Tappan’s usefulness. He’s fostered complaints already about more
middle-income apartments and about the plausibility of skyrocketing neighborhood property taxes. Considering the $21 million price tag, Rosen asserts that building 100 percent of The Tappan with lower-income tenants in mind wouldn’t have been just implausible. It would’ve been, he says, financially impossible.
“The three of us aren’t sitting in a room saying, ‘Let’s not build low-income housing! Let’s not do it!’” Rosen says. “I mean, you can pay the bank back with $1,200 in rent, or you can pay them back with $1,800 in rent.” The former, he says, “is just unrealistic.”
Construction on the Opportunity Corridor at East 55th Street and I-490.
With hopes of hooking in more “socially committed” investor types attracted by opportunity zone funds, Davy reached out to Washington, D.C.-based think tank the Urban Institute this spring after catching wind of a possible solution to prevent cheap land abuse.
They shot back with a partnership and helped create a “social impact assessment tool,” a net-feasibility study which Davy says rates deals’ benefit to poorer areas on a wide variety of parameters: What kinds of jobs will Project X create? How has Project X’s lead supervisor sourced the underrepresented locales?
“This allows us to go to project sponsors, have them show up and spit an aggregate number which literally rates how their project will be beneficial,” Davy said.
Though the so-called scorecard is still in its beta stage, Davy is sure that if Opportunity CLE can make its usage necessary, it can curtail the building of projects clearly aiming to put more bucks in the investor’s pocket. In fact, Davy says one of the heads of the Cleveland Rocks Climbing Gym, Kevin Wojton, was involved in interviews to shape the tool in the first place.
As for the Tappan, which Davy says was “not around” for the scorecard beta testing, he is certain Rosen and crew’s buildout will show future opportunity fund holders how to properly make use of tax benefits.
It’s better for Tremont, he says, to have than to have not.
“I mean, at least they’re pretty upfront about it,” Davy says. “Without opportunity zones, they would never have made the numbers work in the first place.”
Brenda Parks says she's open to seeing what the Opportunity Corridor brings once it's finished in 2023.‘What we’re doing together’
On a recent clear-sky day near the border of Fairfax and Central, about a dozen or so locals set up tents and tables outside of University Hospitals Otis Moss Jr. Health Center
on Quincy Avenue. Among the reverends, urban farm owners and reps from the city’s Department of Minority Outreach is an aura of neighbor positivity, one piggybacking off a recent UH renovation announcement and upgrades to the nearby Karamu House.
Talk is positive, despite the fact that this is in the so-called Forgotten Triangle, an area pockmarked with grass lots, quiet public parks and wide stretches of grated-window public housing. And that, in a year or so, several dozen homes will be razed to make way for a $306 million roadway.
“Sure, we’ve got a lot of vacant lots here,” says Brenda Parks, 63, who works in the Fairfax neighborhood and grew up in Glenville 15 minutes up the way. “But what about [building] some homes here? A lot of the old houses are troubled by lead poisoning.”
Glad about the general improvement of the Fairfax neighborhood—especially the state of the Otis Moss Jr. Health Center in recent years—Parks says she’s open to seeing what the Opportunity Corridor brings once it’s finished in 2023, especially in the sector of jobs for the area’s young, African-American population. Those, she says, “who’ve for a long time been ignored” by the city.
Jay Hope maintains a kind of smile-worthy skepticism on the Opportunity Corridor.
Down the way from Parks is Jay Hope, a resident of Central who lives 13 blocks west of the Otis Moss Jr. Health Center with his wife and three kids. After graduating from Miami University in Hamilton, Ohio, in creative economic development, Hope moved back to Cleveland to operate a small art-based nonprofit out of a renovated International school bus.
As for thoughts on the Opportunity Corridor, Hope maintains a kind of smile-worthy skepticism; on one hand, he wants to see a big arts festival in Fairfax or Central, akin to the now-defunct Hessler Street Fair. On the other hand, he’s weary of who exactly controls the reins of developing.
“I always think of it like this: What you do for me without me is what you do to
me,” Hope says. “What you do for me with
me, then we’re doing it together.”
Walking east on Quincy Avenue, Hope, wearing a T-shirt that reads “Neighbor Up” on it, picks up littered beer cans with his trash grabber. He spots a group of middle-school age boys nearby and says hello to them, as if he’s seen them before. They look over, confused by Hope’s spontaneous clean-up duty.
“If I can go around picking up trash, how do you think this looks to outsiders? To kids?” he speculates. He continues, filling a small black bag of trash. “To me, it looks like we’ve begun to care.”
CLE Means We: Calls to Action
What can you do to learn more about how leaders are ensuring opportunity zone projects are equitable?
1) Follow opportunity zone development news on the Opportunity Exchange
2) Follow Ward 6 updates
to hear about projects in The Forgotten Triangle.
3) Contact Opportunity CLE
to hear more about how their social assessment tool is working in your neighborhood.
This article is part of our "CLE Means We: Advancing Equity & Inclusion in Cleveland" dedicated series, presented in partnership with Jumpstart, Inc., Greater Cleveland Partnership/The Commission on Economic Inclusion, YWCA of Greater Cleveland, and the Fund for Our Economic Future.
To see other stories in our CLE Means We series
, click here