Municipal officials from across the country came to New York on Jan. 16 to U.S. Opportunity Zone Expo to speak on the importance of Qualified Opportunity Zones for their communities.
Many local and state officials see great potential in the creation of such investment incentives to help fuel redevelopment.
“Los Angeles is moving full steam ahead on opportunity zones,” Charles Small, federal-affairs liaison in the office of Mayor Eric Garcetti of Los Angeles, said at the event.
The city is creating its prospectus, and it is developing a web portal that will contain information on all opportunity-zone projects in the city, he said.
Los Angeles has been actively investing in its infrastructure like the Crenshaw/LAX railway line, Small said. This $1.8 billion line goes through three or four opportunity zones and will give investors and employees easier access to these underserved zones, he said.
Investors can roll their capital gains into Qualified Opportunity Funds, which must invest at least 90 percent of their assets into these opportunity zones. The capital gains tax is eliminated if the QOF investment is held for 10 years.
The government shutdown led to the postponement of a Jan. 10 hearing to clarify issues surrounding opportunity zones. Among the issues: oversight of the program, proper reporting mechanisms, gentrification, cannabis investments, and sustainable progress for their communities.
The U.S. Treasury did not rule on many issues yet but was working on them,Dan Kowalski, counselor to Secretary Steven Mnuchin, said at the event. “We won’t ding you if we change our mind in final negotiations,” Kowalski said.
While opportunity zones cannot have liquor stores and gambling centers, communities were concerned about businesses like cannabis and payday lenders, said Thomas Lopez-Pierre, managing member of Harlem Real Estate Fund, who attended the event.
Gentrification was another issue, he said.
Zoning could be one way to address these issues, but the spirit and intent of QOZ funds would be important in the success of the program, Hasoni Pratts, vice president for opportunity zones at Empire State Development, said.
Indeed, “as long as cities are alive entities, gentrification will be a fact of life,” LA’s Small said.
New York carried out a strength, weakness, opportunity and threat analysis for opportunity zones, Pratts said. Empire State Development works across New York to encourage business investments through various strategies.
Deadlines and approval processes can be a challenge for a qualified opportunity zone project, she said. Thus, New York was working on an expedited calendar for QOZ approvals, Pratts said.
The organization had regional working groups developing their own priorities for these investments. But ensuring high-value social development was also a challenge, she said.
Toward that end, the group organized regional summits for communities across New York to ensure that the benefits of economic growth were broadly dispersed, Pratts said.
For Miami Gardens in Florida, opportunity zones are a way to fast-track approval processes and reduce permitting fees, according to Mayor Oliver Gilbert.
“The opportunity zones provided us with an incentive mechanism that we could offer our investing community,” Gilbert, a keynote speaker at the event, said. “We are aggressive and intentional in inviting investments.”
The mayor’s office will engage services of private contractors in case of a resource crunch in inspecting projects, he said. “We are trying to open doors for these investments quickly,” Gilbert said.
In addition, his office was in discussions with large developers and contractors to discuss and remove other impediments, he said.
The Town of Hempstead, New York, had a few false starts but was in desperate need of redevelopment, said panelist Adam Haber, deputy chief of staff for economic development.
“We will bend over backwards and fast-track these projects,” Haber said.
OZs a challenge
Opportunity zones are a good idea that doesn’t go far enough, Gilbert said.
For instance, low-income census tracts were a good start, but opportunity zones excluded contiguous tracts that were inextricably linked to the development of these zones.
“QOZs are not easy, but doable,” said keynote speaker Herman Cain, a Republican who ran for president in 2012.
Fund managers should do a needs assessment and increase their awareness of communities they want to invest in to ensure the success of their investments, Cain said.
They should also work with non-government grassroots organizations for non-profit stimulus including job training, life management and financial planning, he said.
“With a high business sentiment environment, there is not a better chance for opportunity zones than now,” Cain said.
Action Item: Read more on QOZs here https://bit.ly/2JtrAAU