Gov. Rick Scott rejected impoverished areas originally identified by West Palm Beach leaders as top picks for the opportunity zone program, while also bestowing the tax break on a tract that includes a superyacht marina owned by a major GOP donor.

Source: U.S. Census, Google (Al Shaw/ProPublica)

A spokesman for Scott, who is now one of Florida’s U.S. senators, declined to comment on the superyacht marina case but said in a statement: “Then-Governor Scott’s focus was on supporting job creation in low-income areas in the state, based on federal requirements and what would offer the best return on taxpayer dollars. That’s what guided every decision he made.”

In a statement, Rybovich President Carlos Vidueira denied the firm had sought the tax break for its own benefit. “The motivation to seek approval of an Opportunity Zone designation was to create incentives for redevelopment by third parties in the surrounding neighborhood. The letter was not motivated by an attempt to create incentives for Rybovich” or the Related Group. He pointed to the firm’s support of a nonprofit effort to revitalize the area called Purpose Built Communities, which aims to create affordable housing and jobs.

Vidueira added that “Rybovich has never planned the use of any Opportunity Zone tax deferment for its property.” He declined to comment on whether it might raise money from other investors taking advantage of the tax break, or on Related Group’s stated plans to use the tax break.

Related Group’s general counsel, Betsy McCoy, said the firm “had no involvement in former Governor Scott’s designation of Florida’s Opportunity Zones.” She added Related Group first learned of the tax break when the governor’s press release went out. A spokeswoman for Ross’ Related Companies did not respond to questions.

The opportunity zone tax break was pitched as the prime anti-poverty measure of Trump’s signature legislative achievement, the Tax Cuts and Jobs Act of 2017. An idea that drew bipartisan support — notably from Sen. Cory Booker, D-N.J. — the program is supposed to incentivize investors to direct their capital to needy areas. In exchange, they get a lucrative break on capital gains taxes.

After the new law passed, there was a brief, high-stakes window at the start of 2018 when decisions were made. First, the Treasury Department drew up a list of eligible census tracts based on income and poverty data. Then each governor selected a quarter of the tracts in their state for opportunity zone status. Finally, the Treasury OK’d those picks. The process gave enormous autonomy to the governors, especially because the Treasury applied little scrutiny to the selections before approving them.

In the newly designated opportunity zones, investors get a trio of subsidies. If investors take capital gains — generated, for example, by the sale of stock that has increased in value — and put it into a deal in one of the zones, they don’t have to pay capital gains tax up front. Later, their tax bills are trimmed. And, most important, any appreciation on the new investment in the opportunity zone is tax-free after a decade.

The designation was an immediate boon to owners of property within the selected areas. Values on development sites went up on the expectation that new investment could come in, studies suggest.

Plans for the Marina Village development filed with the city of West Palm Beach by Rybovich and condo developer Related Group. (Related Group/Rybovich via City of West Palm Beach)

When the Florida Department of Economic Opportunity created a statistical model incorporating unemployment rate, poverty and population density to come up with a list of opportunity zone picks, Huizenga’s superyacht tract was not included, according to the Florida agency’s internal documents.

City leaders identified three other tracts in the North End of West Palm Beach as their top picks to be opportunity zones. All three are poor. “The core tracts of the North End are racially and ethnically diverse, with a population of approximately 57,000 people, of which over 65% earn less than $15,000 per year,” according to a city memo. They were also attractive areas for growth. All “are rebounding from significant blight and are well positioned for new investment,” the memo said.

The tract with the superyacht marina was wealthier and whiter than the tracts identified by city leaders. Based on median income, it is hardly rich. But the area is testament to how the overall economic data of a single census tract can mask pockets of extreme wealth.

On North Flagler Drive along the Intracoastal Waterway, multimillion-dollar mansions dot the waterfront, obstructed from street view by walls and palm trees. Last year, Rybovich’s Huizenga bought a $5 million property from Rosie O’Donnell there, down the road from the superyacht marina.

Sylvia Moffett, a former West Palm Beach city commissioner, said in an interview there is little connection between the predominantly poor areas of the North End and the wealthy stretch of waterfront. “The houses along the Intracoastal get torn down and rebuilt a lot. Mansions go up,” she said.

Gated mansions line the waterfront near the marina, obstructed from street view by walls and palm trees. (Saul Martinez for ProPublica)

In an April 2018 letter addressed to Scott, Huizenga made his pitch to the governor to add the superyacht tract and two others. He cited the Rybovich-Related Marina Village project: “Within these census tracts, The Related Group is planning to invest $120 million into the construction of a new rental residential building that is scheduled to break ground in the first quarter of 2019,” Huizenga wrote. He also noted Rybovich support for a “community based initiative that will be bringing hundreds of jobs” to the area.

Rybovich officials got the city of West Palm Beach to amend its initial requests to the state to add the superyacht tract, emails show. The city added the new areas because of “expressed interest by a major local employer,” a West Palm Beach official wrote to the state economic development agency. Huizenga’s letter was included in the city’s recommendations submitted to the state.

A Florida Department of Economic Opportunity document subsequently listed the superyacht tract under Rybovich’s name, marked as “Added From Request.” A week later, on April 19, Scott announced his selections for the opportunity zone tax break, the superyacht tract among them. In a press release about the West Palm Beach picks, a Florida official said the program “will continue our progress in revitalizing low-income and rural regions of the state.”

Two out of three of West Palm Beach’s original, poverty-stricken priority areas did not make Scott’s cut.

A Scott spokesman declined to comment on his specific decisions. West Palm Beach did not respond to requests for comment. A Florida Department of Economic Opportunity spokeswoman said in a statement that the agency “accepted input from communities across the state, including local government, business leaders, economic development organizations and investors. ... Governor Scott ultimately made all decisions on which census tracts were nominated as opportunity zones.”

An empty lot in a West Palm Beach tract that Gov. Rick Scott rejected as an opportunity zone. City leaders wrote that the tracts they recommended were poor but “well positioned for new investment.” (Saul Martinez for ProPublica)

The plans for the Marina Village project have changed several times, and it has not started on schedule. But last year, the developers announced rents would be up to $3,000 a month for one-bedroom units and $4,500 for three-bedroom units, plus penthouses for an undisclosed sum. The project is physically oriented away from the poor parts of the census tract, where schools are struggling and the crime rate is high.

The chairman and founder of Related Companies, Ross, along with Pérez and Huizenga, are all donors to Scott. Collectively, they and their families have given at least $1 million to Scott and the Florida GOP in the last decade.

In 2013, Scott gave Wayne Huizenga Sr. a Great Floridian award, the state’s rough equivalent of the Presidential Medal of Freedom. He died last year.

Another politically connected developer successfully lobbied Scott for an opportunity zone, for yet another already-planned project, this time in Tampa.

As far back as 2014, Vinik, the Tampa Bay Lightning owner, has had his eye on redeveloping a swath of the city’s downtown surrounding his hockey team’s arena. In mid-2017, Strategic Property Partners, a joint venture between Vinik and Bill Gates’ Cascade Investment, announced a $3 billion redevelopment plan for the area. The project, Water Street Tampa, is slated to include luxury apartments, hotels, stores and restaurants catering to Tampa’s growing millennial population.

In early 2018, documents show that Vinik’s firm, along with the city of Tampa, requested that the area for the investment be made an opportunity zone. Vinik has given hundreds of thousands of dollars in campaign contributions to Scott in recent years. Scott picked the tract that contains most of the development for the tax break.

The tract has a median family income almost twice as high as the Tampa metro area, placing it among the top 0.5% of opportunity zones nationwide in terms of income.

In a statement, Strategic Property Partners defended the area’s designation, saying: “Downtown Tampa has long been a candidate for development and the establishment of Opportunity Zones has helped increase and accelerate investment. Water Street Tampa is transforming a vacant area of land in downtown Tampa into a new community within the city.”

While the law gave the Treasury the power to vet the selections of each governor, the agency appears to have simply rubber-stamped the picks, said Brett Theodos, a senior fellow at the Urban Institute who studies opportunity zones.

“Treasury appeared to elect for the lowest common denominator screening, to just make sure tracts were technically eligible,” Theodos said. “We have yet to hear that Treasury ever denied a nominated zone because it didn’t fit within the spirit of the objective of the program.”

In response to that criticism, a Treasury spokesman said that the opportunity zone provision of the tax law “gave governors the discretion to nominate areas for designation as Opportunity Zones. The Department had a limited role in the process.”

Thanks to reader Janna Owens. Do you have information about opportunity zones? Contact Justin Elliott at [email protected] or via Signal at 774-826-6240, and Jeff Ernsthausen at [email protected].