Opportunity Zones
By Albert B. Kelly
I’ve heard it said that in the business of life, timing is
everything. When it comes to opportunity in New Jersey and specifically
“Opportunity Zones”, the timing seems to be pretty good as we have a new
governor in Trenton who is looking for ways to get us moving again. This
matters, because over the next several weeks, governors around the country will
be considering which census tracts to nominate as “Opportunity Zones”.
The Opportunity Zone program grows out of the “Investing in
Opportunity Act”, which has our own Senator Cory Booker as a sponsor along with
Senator Tim Scott from South Carolina and Representatives Ron Kind from
Wisconsin and Pat Tiberi from Ohio. They are joined by several dozen cosponsors
from both sides of the isle.
In nutshell, the legislation makes certain changes to the
tax code enabling the designation of Opportunity Zones in low income communities
and providing certain tax incentives targeted for these zones with the end goal
of spurring investment in these communities. Zones are vehicles that let investors
and taxpayers re-invest unrealized capital gains through “Opportunity Funds” connected
with the zones nominated by each state’s governor.
Investors and taxpayers can temporarily defer the
recognition of capital gains invested in opportunity zones. If these
investments are held for at least five years, they become eligible for capital
gains tax reductions or exemptions based on how long the investment is held.
There are to be a limited number of Opportunity Zones in any
given state as only 25% of a state’s low-moderate income communities and census
tracts can be designated. Nominations are due to be sent to the Treasury
Department by each state’s governor for official certification and designation around
March 22nd. As to how these zones will be identified and selected for
nomination, there are several factors that inform the process.
Prospective zones should already be the focus of local and
state programs geared toward attracting investment and nurturing
revitalization. Secondly, nominees should generally be areas that have suffered
business closures or layoffs. Finally, a would-be zone should be an area that
has had some past success managing similar programs such as promise zones, new
market tax credits, or empowerment zones, etc.
I believe that we, and by “we” I am referring to Cumberland
County and the qualifying census tracts in Bridgeton, Millville, and Vineland
(including Port Norris) stack up well. What is unique about us is our ability
to pool resources and work together on behalf of a bigger picture. Consider the
creative approach taken to qualify as an Empowerment Zone back 1999.
Because no single one of our communities could compete with
the large metropolitan cities around the country, the decision was made to
submit a joint empowerment zone application that brought together Bridgeton,
Millville, Vineland, and Port Norris as a single zone entity.
The resulting framework was so successful that even when the
federal pipeline ended and most other zones around the country closed up shop,
the Cumberland Empowerment Zone Corp transformed and continues to play a vital role
in our revitalization efforts making and facilitating investments that might
not otherwise happen.
This track record of success suggests that if possible, we
consider taking a similar approach with regard to Opportunity Zones. I say that
because for the most part, the census tracts that made up the empowerment zone
in Bridgeton, Millville, Vineland, and Port Norris are still in need of
investment, with most having gone sideways or backwards after the great
recession in 2008.
While Governor Murphy is settling into his first term and we
are still in the process of getting acquainted with his approach to governance,
my sense is that he values innovative solutions and won’t hesitate to look
outside the box when it comes to dealing with the state’s many challenges,
which manifest in different ways depending on which end of the state you’re
talking about.
That said, when it comes to Opportunity Zones and having an
impact in our neck of the woods, it’s the collaborative way we have been able
to leverage the strengths of the Improvement Authority, Cumberland Empowerment
Zone, along with our unique regional and geographical assets that lets us punch
well above our weight in terms of maximizing the resources we receive.
In such a fragmented landscape, which seems to be the new
normal these days, all we can ask for is an opportunity, in the form of a zone,
but the “ask” should be with one voice because that’s when we’re the
loudest.