Capital Beat: Sununu ‘opportunity zone’ picks cause stir

  • Under many economic measures, the area that includes Waterville Valley is ahead of much of the state. Gov. Chris Sununu was once the ski area’s CEO and family members are still on the board. The governor, however, says the decision was based on driving economic opportunity. Monitor file

  • Unidentified skiers ride a chair lift at Waterville Valley (N.H.) ski area in an undated photograph. Skiers and riders who do their homework can score savings before hitting the slopes this winter. Waterville Valley photograph

Monitor staff
Published: 12/14/2019 9:21:44 PM

Early in May 2018, Gov. Chris Sununu unfurled a little-noticed list. On it was 27 communities and clusters, all in low-income areas of the state, each newly eligible for tax incentives for economic development.

This month, the governor’s picks have attracted mountains of attention.

The 27 communities were Sununu’s designated “Opportunity Zones” – a list of low-income Census tracts chosen by the governor to benefit from a Republican-passed federal tax program included with a 2017 tax-cut law. Those selected would be part of a program allowing developers to defer capital gains taxes by investing in towns and cities in need.

But the inclusion of one Census tract in particular has Democrats crying foul. By choosing a tract incorporating the towns of Lincoln, Livermore, Thornton and Waterville Valley, Sununu opted to give tax breaks to a town that includes a ski area owned by his family that he used to operate.

Earlier this decade, Sununu became CEO of Waterville Valley resort, which was purchased by a family-owned limited liability company in 2010. He stepped down from that position in 2016 but two of his brothers, James and Michael, continue to serve as corporate officers over the property.

Opponents of the governor, including gubernatorial candidate Dan Feltes, have said the governor made a designation that will profit his family, and could be in violation of state conflict of interest laws.

The governor’s office and its defenders have pushed back. James Sununu has said that Waterville Valley has no plans to take advantage of the tax breaks. The Sununu administration has said the choices were made based on strategic value to the state.

Still, as the accelerating gubernatorial race draws a spotlight to the issue, it’s worth revisiting the entire May 2018 list.

Under the federal program, each state’s governor could choose 25% of all Census tracts deemed low-income. New Hampshire has 105 low-income Census tracts, which allowed Sununu and the Department of Business and Economic Affairs to make 27 selections.

“The goal is simple: to create jobs, to increase wages and to revitalize communities across the state,” Sununu said, announcing the decision back in May 2018.

So how fair were they in choosing? It’s a mixed bag.

By some metrics, New Hampshire did not appear to prioritize the communities with the worst economic statistics. Many communities with tougher conditions than those in Waterville Valley and Lincoln were passed over for selection, a Monitor analysis of Census data shows.

To start, 45 Census tracts had lower median incomes than the Waterville Valley tract, whose median income is $52,000. By comparison, one tract of Manchester not selected earns a median income of $21,000. A stretch of the Concord Heights along Loudon Road has a median income of $37,000; it was not selected either.

Poverty rates also did not seem to be the sole determinant of who got on the list.

Forty-nine of the 78 communities not selected for the investment program have higher poverty rates than the Census tract with Loon and Waterville Valley ski resorts, the analysis showed. That includes that same Concord Heights neighborhood, which has more than double the poverty rate of the Waterville Valley and Lincoln area – 26.5% compared to 11.1%.

The trends go on. Thirty-five of the 78 communities not chosen have higher unemployment rates than the Waterville Valley tract. Sixty-eight of 78 have lower median home values. Twenty-one have higher percentages of severe rent burdens, and 50 have a higher percentage of adults with a high school degree or less.

Democratic lawmakers have sought to use those discrepancies to seek answers from the Business and Economic Affairs department over its selection process.

“This data, along with the lack of transparency around the process, raises serious questions about the criteria for this designation” read a letter sent by House and Senate lawmakers asking for a written explanation of the selection process.

But Sununu’s list didn’t ignore all of the neediest communities. Some of those with the worst indicators did make it on the list.

And by other metrics, the Opportunity Zone choices were fairly made.

The Urban Institute, a national research group, analyzed the decisions made by all 50 states according to a different standard: How underdeveloped or overdeveloped the chosen areas already were.

In July 2018, the organization gave each tract a score of 1 to 10 based on how much economic investment there appeared to be already.

Nationally, states did not do well at directing the benefit to underdeveloped areas; 28% of the Opportunity Zones lie in Census tracts rated at an eight, nine, or 10.

New Hampshire beat that trend, awarding zones to areas that averaged a score of five.

For its part, the Sununu administration says that the Census tracts were chosen based on where development made the most sense – along major highways for instance, or where communities are primed to take advantage of it.

“Our goal was to designate tracts that present the best opportunities for investment and can leverage other state and federal resources,” said Taylor Caswell, the Business and Economic Affairs commissioner, back in May 2018. “My hope is that once this program is fully deployed, it can serve as catalyst to bringing economic opportunity to New Hampshire communities.”

That included the stretch around Lincoln and Waterville Valley.

The Sununu family continues to maintain an interest in the ski area, for which James Sununu serves on the board.

But on Thursday, a spokesman for the governor, Ben Vihstadt, pushed back at the suggestion of a conflict of interest.

“As has been repeatedly stated for the last three years, the governor is not involved in any decision-making or day-to-day functions at Waterville Valley,” Vihstadt said. He added that the tract in question was one of the largest in the state, and that it was chosen to allow investment to bolster the towns besides Waterville Valley.

Those towns were chosen “because of their close proximity to the I-93 corridor, which serves as the central artery to the North Country,” Vihstadt continued.

“Our office worked with the Department of Business and Economic Affairs to identify eligible opportunity zones across the state that, when taking the aforementioned criteria into account, would have the greatest likelihood of outside investment,” Vihstadt said.

Democrats are not fading quietly. Last week, the state party filed a right-to-know request to Sununu’s office and other state agencies for documents surrounding the decision to include the tract – and a Freedom of Information Act request to the U.S. Treasury Department.

And in their letter Thursday, House and Senate Democrats were equally adamant.

“Designating ‘Opportunity Zones’ has the potential to lift up low-income communities,” they wrote, ” but to maximize the impact of this economic lever, this tool must be used transparently, effectively, and targeted to the communities most in need.”

(Ethan DeWitt can be reached at 369-3307, or on Twitter at @edewittNH.)

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