How a Baltimore Billionaire Won a Tax Cut Trump Said Would Help the Poor

June 24, 2019

ProPublica's Jeff Ernsthausen explains how a poorly-designed map boosted billionaire Under Armour CEO Kevin Plank's development company

ProPublica's Jeff Ernsthausen explains how a poorly-designed map boosted billionaire Under Armour CEO Kevin Plank's development company


How a Baltimore Billionaire Won a Tax Cut Trump Said Would Help the Poor

Story Transcript

JAISAL NOOR Welcome to The Real News Network. I’m Jaisal Noor in Baltimore. This may not come as a huge shock, but it turns out that even the provisions of Trump’s tax cuts that were supposed to help the poor, are going to the wealthy instead. That’s according to a new report in ProPublica, which found the Baltimore Port Covington Development received a special Opportunity Zone tax break meant for low-income areas— even though it’s not poor and the state found it didn’t qualify. As though that’s not bad enough, the tax break came at the expense of potential investment and one of Baltimore’s many low-income neighborhoods. This tax break compounded with the over half a billion in subsidies the city has already granted the project, which is being spearheaded by the firm Sagamore Development, owned by billionaire Under Armour CEO, Kevin Plank. This news comes amidst growing scrutiny over Baltimore’s shocking inequities. On Saturday, water was restored for residents of the Poe Homes public housing projects, but residents say they still lack adequate water pressure after five days.

BALTIMORE CITY RESIDENT It’s a trickle. It’s coming out. Like I said, it’s where as though we can’t even flush our toilets, can’t take baths. You know, so it’s a real, right now, crisis situation and I’ll show you.

JAISAL NOOR City officials announced water was restored late Saturday, but as one resident showed us, the water pressure remains very low. Water is just trickling out of this faucet.

BALTIMORE CITY RESIDENT [trickling water] Water, this is coming out. This has been what they’re saying is fixed. It’s not coming out. This is all we have.

JAISAL NOOR We’re joined now by the report’s co-author, Jeff Ernsthausen. His piece, “One Trump Tax Cut was Meant to Help the Poor. A Billionaire Ended Up Winning Big.” Thanks so much for joining us.

JEFF ERNSTHAUSEN Thanks for having me.

JAISAL NOOR So, start off how you got into this story.

JEFF ERNSTHAUSEN So this is a story that was really driven by data. We began by looking at the census tracks that were included in this Opportunity Zone program, and we began looking at the ones that seemed like outliers in terms of their level of income and level of poverty. That’s what led us to Port Covington ultimately. We couldn’t quite figure out how it qualified. And as we dug deeper, it turned out that the answer to the mystery was it shouldn’t have.

JAISAL NOOR And so you had some FOIA requests you put in, and you wrote, “As the selection process was underway, a deputy chief of staff to Maryland’s governor wrote in an email,” that you obtained, “that ‘Port Covington does not qualify as an opportunity Zone.’ Maryland’s governor chose the area for the program anyway— after his aides met with lobbyist for Kevin Plank, who owns 40% of the project.”

JEFF ERNSTHAUSEN Mm hmm. Yeah. So, sort of following the data and wondering how this had qualified, we decided to put in some PIA requests with the governor’s office and with the Department of Housing and Community Development, and we got back these emails that clearly showed that one— they had met with the developers. And two— that they were aware that the area was too wealthy to qualify for the program.

JAISAL NOOR And what was the response from the governor’s office and the developers after you presented them with these findings?

JEFF ERNSTHAUSEN So the developer came back with a statement. They did not answer our specific questions about these findings. The governor’s office also gave us a statement. They did make an official available to talk to us to confirm some details of the meeting.

JAISAL NOOR And so, as we know, the Trump tax cuts helped the wealthy, overwhelmingly. And so, this was one of the key things that was one of the key headliners, you guys wrote, that was supposed to help low-income areas. So talk about how this all actually happened.

JEFF ERNSTHAUSEN Yeah. So this provision in the law I think got started many years ago by Sean Parker, an early investor in Facebook who says he had a lot of capital gains and began thinking about how those could be used to transform parts of the world that did not have a lot of investment. The proposal ended up getting backing from Cory Booker, the Democratic Senator from New Jersey, and also from Tim Scott, a Republican Senator from South Carolina. And so, it ended up making its way into the huge Trump tax cuts of 2017 as one provision within the law.

JAISAL NOOR And so, talk about exactly the map you found and how exactly Port Covington qualified for this.

JEFF ERNSTHAUSEN Yeah. So it’s a bit in the mapping weeds, if you will, but basically, we started to ask the Treasury how did this area get in? They pointed to this part of the law that says if an area has low population and it’s within this Empowerment Zone, which is a program from the 1990s with similar goals, then it could qualify. They interpreted “within” to mean overlapping at all, so they didn’t add in any sort of brackets for like, did anyone have to live there, or does it have to be a certain size. And then it turned out that this ended up allowing in tracks that would have as minimum overlap, that isn’t actually significant. The map files you’re using aren’t precise enough to make those judgment calls, and there’s a question about whether you should be using them for making these kinds of legal decisions.

JAISAL NOOR And did they have a response to this story?

JEFF ERNSTHAUSEN They reiterated that they made a technical decision to include any track that overlapped. They did not respond specifically to the question of, you know, this looks a lot like an error.

JAISAL NOOR And it’s just a small, sort of, parking lot in between two parts of a highway that get into Baltimore.

JEFF ERNSTHAUSEN Yeah. I mean, if you look at these two map files, they’re both drawing a line down I-395, but I-395 is 200 feet wide. They just picked two different places on that road, and so they end up with this overlap that’s basically at a parking lot. I think it’s owned by the state and it’s empty. It’s gated off. No one can live there. So it’s interesting that a program designed to, you know, be aimed towards a low-income area, that someone would make that decision based on this small overlap that no one could possibly even dwell in, and there’s nobody that could be affected in the Port Covington area by a program that was meant for the area near Camden Yards.

JAISAL NOOR And, you know, as you note in your piece, low-income areas, some had to be excluded from the selection because Port Covington was selected. That means like a neighborhood in Brooklyn, which is close by— high-poverty rates, lack of opportunity— didn’t have this designation.

JEFF ERNSTHAUSEN Yeah. The way the law is written, the governor can choose 25% of the eligible tracks in Maryland. So by definition to include Port Covington, some tracks somewhere else that qualified for the program had to be left out. There were three that the city had suggested that were removed by Governor Hogan, and among them was part of Brooklyn, Reservoir Hill, an area over near Edmondson Village.

JAISAL NOOR And you also touch upon the fact that, so these are the latest, sort of, name for the same type of subsidy or tax break for developers. It’s had different forms over the last few decades. You looked at, sort of, like the track record of that and how it’s being implemented a little bit. Can you talk a little bit about, do these actually have a benefit for local residents?

JEFF ERNSTHAUSEN Well, I think it’s an open question. There’s nothing in this law that says that the investments must benefit anyone who actually lives there, there’s no requirements that you employ people from the area, and there’s no reporting requirements, so there’s no guarantee that we’re ever going to learn whether this program actually benefited anybody or even where investments occurred that aren’t publicly announced.

JAISAL NOOR And the Poe Homes came up earlier. It’s a public housing project in West Baltimore and before this interview, you pointed out that that also has the same designation. Can you talk about that as well?

JEFF ERNSTHAUSEN Yeah. So the Poe Homes are in a designated Opportunity Zone and I think I’m not aware enough of what sort of development that may be sort of intended to be attracted there, but I think on the one hand one might argue, well, you know, getting Plank interested and his company interested in Opportunity Zones brings more people to Baltimore to talk about it. On the other hand, one can also argue that potentially, the funds will flow into the most lucrative projects rather than ones that might be a little bit more difficult to see the profitability of.

JAISAL NOOR Yeah. And just, you know, just driving through the city, you can see the disparities between neighborhoods that have historically had investment or historically haven’t. You know, this was the first city to have racial segregation in 1910. And, you know, you can see the effects of policies like redlining. I was at the Poe Homes yesterday and all the neighborhoods around it have— and it’s just a mile from where we’re sitting right now— but even the adjacent neighborhoods, a lot of the homes are boarded up and, you know, there’s high poverty rates. They haven’t had water for a week, but the residents there point to systemic disinvestment there, which is, you know, true of many neighborhoods outside of the core part of Baltimore— like where a Port Covington is, which is getting in total over $2 billion in subsidies from the state and local officials.

JEFF ERNSTHAUSEN Mm hmm.

JAISAL NOOR Well, Jeff Ernsthausen, thank you so much for coming on and talking about your piece.

JEFF ERNSTHAUSEN Yeah. Thanks for having me. Appreciate it.

JAISAL NOOR And thank you for joining us at The Real News Network.