Wexford Project’s $55.2M Hotel Delay Tied to Trump Opportunity Zone Funding

Wexford Project’s $55.2M Hotel Delay Tied to Trump Opportunity Zone Funding

Ten months after the Rhode Island Commerce Corporation approved $7.6 million in tax incentives for the proposed $55.2 million Aloft hotel located on former 195 land, the project has not broken ground.

The reason, according to Rhode Island Commerce Secretary Stefan Pryor, is that hotel Investors are “recruiting dollars” for the highly lucrative — and controversial — “Opportunity Zone” designation under the Trump tax cuts of 2017. 

“The Aloft hotel is located in one of our Opportunity Zones — so investors have been working on recruiting dollars within the new ‘OZ’ structure, and my understanding is that they are approaching the finalization of their capital stack, which means that once the financing is done, they can proceed with their project,” said Pryor on Monday. 

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“I would not want to preempt them, but we are very optimistic about the creation of a new hotel in the 195 district — as we call it the innovation and design district,” said Pryor.

In January, CV Properties’ Dick Galvin had indicated that construction on the Aloft hotel would start “later in the summer” of 2019 -- and Commerce officials confirmed Monday that the “Opportunity Zone” capital gains tax relief designation under President Donald Trump’s tax breaks of 2017 had not been part of the original proposal. 

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In 2016, when Commerce approved tax incentives for the Wexford Innovation project on 195, “1,000 direct and indirect permanent jobs” were promised by jobs in the Innovation Building, Brown School for Professional Studies, retail and food — and 57 jobs at the Aloft hotel. 

A GoLocal investigation into claims of job creation found the numbers were at best “hyper-inflated.”

Now, Commerce RI’s revelation that CV Properties is planning on using financing as a part of an “Opportunity Zone” comes at a time when the program is being criticized as a “windfall for the rich.”

“President Trump has portrayed America’s cities as wastelands, ravaged by crime and homelessness, infested by rats,” wrote the New York Times in August. 

“But the Trump administration’s signature plan to lift them — a multibillion-dollar tax break that is supposed to help low-income areas — has fueled a wave of developments financed by and built for the wealthiest Americans,” the NYT continued. 

The White House in April, however, touted what they said is the success of the program, stating that under the Tax Cuts and Jobs Act of 2017, “investors can get tax benefits by investing in communities designated as Opportunity Zones:"

* Investors receive tax benefits on capital gains that they reinvest into Opportunity Zones through investment vehicles called Qualified Opportunity Funds

* These benefits are structured to promote long-term investment that will help these communities recover and thrive.

In Rhode Island, a provision was enacted in the FY2020 budget to allow taxpayers to avoid paying capital gains taxes on Opportunity Zones investments after holding the investment for 7 years, similar to the federal Opportunity Zone incentive provision that allows for the same benefit for 10 years. 

Rhode Island Progressive Democrats blasted the move.

“So-called Democrats have rubber-stamped Trump’s tax cuts for the rich in Rhode Island’s budget. In 2017, Trump’s tax bill implemented ‘opportunity zones’ that incentivize investment in poor areas selected by each state’s governor. The reality, however, has proven the opposite,” stated the Progressive Democrats. 

“A recent report by ProPublica shows how Under Armour’s billionaire CEO, Kevin Plank, will be winning big after lobbying Maryland’s Republican Governor, Larry Hogan, to include Port Covington as an opportunity zone. In selecting the tract, the governor excluded a neighborhood that was actually poor from the program,” the group continued. “As a consequence, the residents of Baltimore lose out, while Plank’s corporate development will now benefit from millions in tax breaks. With opportunity zones approved as part of the budget, the tax code is rigged in favor of billionaire real estate developers like Trump.”

Hotel Building Boom

Being built or recently completed are 669 new rooms in Providence:

- Homewood Suites Hotel, 5 Exchange Street, 120 rooms

- Woodspring Suites Hotel, 181 Corliss Street, 124 rooms

- Marriott Residence Inn, 111 Fountain Street, 168 rooms

- Hotel Beatrice, 28-32 Kennedy Plaza, 48 rooms

- Aloft Hotel, Innovation Complex, 169 rooms