OP-ED: Bipartisan tax incentive opens door to opportunity in York
The passage of the 2017 Tax Cuts and Jobs Action created 8,700 “Opportunity Zones” across the country and ever since then no economic development tool has received more attention than these federal tax incentives aimed at driving private capital to struggling communities.
For example, in December, President Trump issued an executive order directing federal agencies to align their programs with opportunity zones in what he called a “historic” effort to address poverty. In his final speech as Speaker of the House, Paul Ryan touted opportunity zones as one of his signature achievements.
On the other side of the aisle, current Democratic presidential candidate Corey Booker has cited his role in creating opportunity zones legislation as one of his qualifications for a presidential run.
And, closer to home, York Mayor Michael Helfrich has called opportunity zones a “huge step in garnering the investment that is needed to bring back significant amounts of walkable jobs into our neighborhoods.”
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Wow. That’s a lot of buzz. So, what are Opportunity Zones and how will they impact the City of York?
Opportunity Zones are census tracts that have been selected by a state’s governor and must qualify as distressed because of high rates of poverty and low median household income. Of the 300 designated opportunity zones in Pennsylvania, all five of York County’s zones are located within the City of York.
In selecting the tracts for designation, Gov. Tom Wolf sought input from stakeholders in state and local government, as well as economic development partners like the York County Economic Alliance.
York’s Opportunity Zones were intentionally selected to encompass former commercial corridors, industrial sites, brownfields, and other areas that could benefit from investment.
Opportunity Zones are intended to be a free-market tax incentive. The incentive allows individuals with capital gains from the sale of a tangible asset, such as stocks, bonds, property, or interest in a partnership to reduce or negate their tax liability if they invest their gains in a business or real estate project within an Opportunity Zone.
The longer the capital gains remain invested; the greater the tax benefit. If the investment within the zone grows in value, there are also incentives to minimize or negate any tax liability on those gains as well.
In theory, more than $6 trillion of capital gains are qualified for investment in the 8,700 Opportunity Zones across the country. What that really means for cities like York remains to be seen.
The IRS recently released a second tranche of guidelines for the program, and CPAs, lawyers, and brokers across the country are scrambling to learn as much about the program as possible. Furthermore, the reality of matching qualified investors to viable projects may narrow the scope and impact of the tax break.
The York County Economic Alliance sees Opportunity Zones as a potentially powerful tool, comparable in some ways to New Market Tax Credits, which have spurred investment in urban communities for nearly 20 years. It’s still too early to predict how much capital will actually flow to York, but we need to be prepared when it does.
That’s why we have launched www.OpportunityYork.org as a clearing house for information about York’s five Opportunity Zones. As we learn more about the program and its impact on York, we’ll continue to add resources to the website. We are also actively meeting with neighborhood associations, community groups, local government, state legislators, and the private sector to discuss what projects or businesses could benefit from investment and are the most likely to attract qualified investors.
This week we published an investment prospectus to promote Opportunity York to potential investors across the country. The prospectus is available on our website and we are sending it to hundreds of qualified investors in the coming weeks. The prospectus is a marketing piece that summarizes the reasons York is a great place to invest, showcases the development incentives and resources available to businesses, and even highlights some of the investable projects with our five zones.
One of those projects is the proposed York Plan 2.0 Innovation District, which is located in the Northwest Triangle, along the Codorus Creek. The land is currently owned by the City of York’s Redevelopment Authority, but a development team with York Exponential has completed conceptual designs for several new buildings housing office space, robotics manufacturing, and more. They have also successfully secured $6 million in state Redevelopment Assistance Capital Program funds and are lining up tenants and investors to make the project a reality. Investors in this project could take advantage of the opportunity zone incentive. Indeed, some national opportunity funds have already expressed an interest in participating.
Another potential project is the former Pewtarex Foundry, located on Hartley Street. Royal Square Development & Construction purchased and stabilized the impressive structure, and now it awaits redevelopment for manufacturing, office space, business incubation, or event space — any of which could create walkable jobs for WeCo, Salem Square, and other nearby neighborhoods. York has dozens of similar underutilized or vacant warehouses and industrial complexes, and many of them are located within our five opportunity zones.
Ultimately, national buzz aside, opportunity zones are not a panacea for our community’s needs. They won’t bring warehouses or former factories back to life overnight. They won’t drastically restructure the historic factors that contribute negatively to poverty, housing availability, and economic mobility. But they could be yet another useful tool to add to our tool kit of economic development programs, and they could bring much-needed resources to individuals and organizations who want to make positive change in their city.
That’s why we are watching closely and will work to leverage this opportunity to its fullest. If you want to learn more about York’s opportunity zones, please visit www.OpportunityYork.org.
— Silas Chamberlin is vice president for economic and community development at the York County Economic Alliance.