Fancy Hotel Renovated with Your Tax Dollars

The Blackstone Hotel in Chicago.
The Blackstone Hotel in Chicago.

The Town Hall Education Arts Recreation Campus, an education and arts center, is an oasis in a needy Washington, DC neighborhood.

Treasury official Don Graves says it's possible only through a government program called "New Markets."

CBS News investigative correspondent Sharyl Attkisson asked Graves, "You think it's helped change the whole character of the neighborhood?"

"Absolutely," Graves replied.

New Markets encourages private companies to invest in low-income communities.

What do the companies get? Hefty tax breaks: for every dollar they commit, they get back 39 cents.

But you might be surprised at just what qualifies as help for the poor. The luxury Blackstone Hotel in downtown Chicago is a favorite of movie stars, royalty and presidents. Believe it or not - the Blackstone's pricy renovations were financed with the help of your tax dollars through the New Markets program - intended for poor communities.

Rich Take From Poor as U.S. Subsidy Law Funds Luxury Hotels

The government won't tell us who's getting New Markets money - saying that's protected by privacy law, even though it's your tax dollars.

City records show beneficiaries of the Blackstone's opulent makeover include some of the biggest names on Wall Street. Prudential Financial invested $40 million dollars and received a $15.6 million dollar tax credit.

So how does a swank hotel qualify as a project to help the poor? It boils down to how you define poor in this pricey area near popular tourist attractions.

At 3.9 percent, the poverty rate among families in the Blackstone area is far too low to be considered distressed.

But New Markets looks at the poverty rate among individuals. Including all the college students - it's 26 percent. On paper at least: it's needy.

"When you heard the Blackstone Hotel got redevelopment help with taxpayer dollars, what did you think," Attkisson asked Fr. Larry Dowling.

"I was very upset," Fr. Dowling replied. Three miles from the lavish Blackstone Hotel, Father Dowling ministers the North Lawnwdale community. Here, 45 percent live in poverty. And there's been no help from the New Markets program. Dowling can't figure out why the Blackstone Hotel got it.

"It cannot be argued," Dowling said. "That's the insanity of it. It cannot be argued that it in any way it helps the underserved."

"How can it be said that a project like the Blackstone Hotel benefits the needy," Attkisson asked Graves.

"The Blackstone project itself was catalyzing development in a community that needed it. It creates hundreds of new jobs and meets the specific needs there," Graves replied.

In fact Graves insists 90 percent of the tax dollars have helped severely distressed communities.

David Dietz paints a different picture, "it's kind of bait and switch."

Dietz dug up the Blackstone and other questionable projects - like an antique car museum in Tacoma, and the Georgia Aquarium - for Bloomberg Markets Magazine.

Dietz says they have little to do with helping the poor. "46 percent of the $16 billion that have been spent according to treasury records have gone to census tracts with a family poverty rate of less than 20 percent. In some cases, as low as zero."

Meanwhile, in west Chicago Father Dowling waits as his impoverished neighborhood gets nothing at all.

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    Sharyl Attkisson is a CBS News investigative correspondent based in Washington.