Opportunity Zones come with hope, and hurdles
By Rosa Salter Rodriguez | The Journal Gazette
A new federal initiative might bring sizable new private-sector investments to low-income areas of Fort Wayne and northeast Indiana. Or not.
Local economic development officials hailed this month's designation by Indiana Gov. Eric Holcomb of 156 census tracts statewide as Opportunity Zones – a designation that means tax incentives will be available to those who invest in certain projects in those areas.
Ten of the tracts are in Fort Wayne, with six more in surrounding northeast Indiana counties – one each in Adams, DeKalb, Huntington, Steuben, Wabash and Wells. But the designations don't make getting more investment a sure thing.
Local economic development officials said the federal government through the Treasury Department still must approve the submitted zones. It's unclear when that will happen and whether all districts submitted by the governor will be approved, said Mary Tyndall, with Fort Wayne Department of Community Development.
Plus, rules about how the tax incentives will be made available and managed remain to be seen, according to a Treasury Department news release.
The program will allow those who have had unrealized capital gains – from, for example, the stock market – to defer taxes until the end of 2026 by buying into Opportunity Funds, according to the treasury department's website. The funds in turn will invest 90 percent of their money in Opportunity Zones.
An unrealized capital gain is one that exists only on paper. A stock has an unrealized capital gain if it has gone up in value but hasn't yet been sold at the higher price.
The Treasury Department was given 30 days after a March 21 deadline for states to submit their zones to approve them, but Indiana submitted its proposal under a provision for a deadline extension.
The uncertainties come because the program, authorized under the 2017 Tax Cuts and Jobs Act, is “in its infancy,” said Sharon Feasel, a Fort Wayne community development official who helped determine local tracts for submission.
Forty Fort Wayne census tracts were submitted. The Fort Wayne-selected tracts include three slated for riverfront development and two that contain the former General Electric campus along Broadway south of downtown, slated to be revitalized as Electric Works.
Also, the North River property along North Clinton Street across from Science Central is part of a selected tract, as is the southeast Fort Wayne area that includes Posterity Heights, a $42 million affordable housing project aiming to break the cycle of generational poverty. Another selected tract includes the area around IPFW and the Northeast Indiana Innovation Center.
An interactive map of all of Indiana's 156 proposed opportunity zones – the maximum number the governor was allowed to designate – can be found at https://www.in.gov/gov/2979.htm.
The nominated census tracts represent 58 counties covering all or portions of 83 cities and towns in Indiana.
Feasel said selected tracts had to meet program guidelines for the percentage of people with low incomes. The tracts' potential to attract and support investment was also considered, she said.
Kevan Biggs, local partner in RTM Ventures LLC, the developer of Electric Works, said being part of an Opportunity Zone could aid developers' search for funding.
He said such investment was not included in the capital listed in project proposals because the zones didn't exist when the financing plan for the first phase of the project, on the west side of Broadway, was being put together.
Although it might be years before Opportunity Zone investments could be used for Electric Works, “I think it can be a mechanism to encourage additional private investment,” Biggs said.
Feasel, who has worked to steer federal New Market Tax Credits to projects in the city, said it wouldn't surprise her if it took years to get the details of Opportunity Zones worked out so they could be put to use. That was the case with New Market credits, she said.
Those credits, established in 2000, were another federal tool to encourage investment and development in low-income areas. Fort Wayne received $55 million in credits this year and a total of $103 million in three rounds of funding. The program, which some thought would be eliminated, has been extended for two more funding cycles, Tyndall said.
The potential money pot for Opportunity Zones may be enormous. A national analysis by the Economic Innovation Group in Washington, D.C., an early supporter, estimates that more than $6 trillion in unrealized capital gains from individuals and corporate investors could be invested nationwide – although it will likely be at least 2019 before investments materialize.
Still, the zones' existence is seen as an encouraging sign.
“The awareness of this program was pretty low, so now there is this wonderful opportunity for these (census tract) parcels to be leveraged for these investors to get these tax credits,” said Brenda Gerber Vincent, a Fort Wayne nonprofit organization executive.
Chief development officer for Lifeline Youth and Family Services, Crosswinds and Lasting Change, Vincent served on the panel that recommended census tracts to the governor, who could designate up to 25 percent of the state's eligible low-income census tracts.
“This is a wonderful thing for Fort Wayne,” she said.