Bloomberg Markets has a terrific investigation into how a federal program meant to spur redevelopment in poor areas is funneling taxpayer money to luxury projects and Big Finance.

David Dietz’s anecdotal lede encapsulates the story, showing that the New Markets program gave Prudential big bucks for its part in the $116 million renovation of downtown Chicago’s Blackstone Hotel, a “Beaux Arts structure, built in 1910, (where) buffed marble staircases greet guests spending up to $699 a night for rooms with views of Lake Michigan.”

It’s a sweet deal for Prudential, which put $9.3 million of equity into the Blackstone and lent the project $30.4 million. The government gave it a refund of 39 percent—$15.6 million—in return.

The Treasury Department administrates the program, which is supposed to benefit areas that have a poverty rate of 20 percent or higher or a median income 20 percent below the metropolitan area. But Treasury use the individual poverty rate in a tract when the family poverty rate is often the better measure. Bloomberg Markets could have done a better job explaining how and why this is wrong.

We do learn up high that the Blackstone tract is skewed because it contains two colleges with a lot of students who show up as “poor.” But the family poverty rate in the area is less than 4 percent.

The messed-up criteria result in stats like these:

The program’s standards open up some of the nation’s wealthiest areas to development, according to Treasury records. Taxpayers have subsidized projects in tracts with median family incomes as high as $200,000, records show.

A total of $7.4 billion of the $16 billion already spent under New Markets, or 46 percent, has gone to tracts with family poverty levels ranging from zero to 19 percent, Treasury and census data show. Those communities include areas of California’s technology-rich Silicon Valley.

Excellent.

There are several good anecdotes, like this one:

In Tacoma, Washington, investors found a way to get New Markets handouts in an area with just a 1 percent family poverty rate. U.S. Bancorp and two other investors used a $34 million Treasury authorization in 2010 to finance construction of an antique car museum.

The museum, which will house the private collection of Harold E. LeMay, a deceased trash-hauling tycoon, needed creative financing to fit New Markets rules…

As a result of the deal, federal taxpayers will pick up 39 percent of the cost of erecting a $34 million shrine housing 500 of LeMay’s cars in a mostly commercial tract with a 24 percent individual poverty rate.

And you have to shake your head at this, which is an excellent catch:

Clinton regarded New Markets as a way to spur development and create jobs in communities held back by high unemployment and lagging business growth. He touted the program on a six- state tour in 1999.

“This is a good business opportunity here,” he said at a cabinet factory in Clarksdale, a Mississippi Delta town with a per capita income of $12,611. “If we can’t fully develop the Delta now, with the strongest economy, when will we get around to it?”

Clarksdale has received no benefit from the tax credit program, Treasury Department records show.

Good work.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.