|via Twitter and Bloomberg|
Among a nationwide patchwork of struggling areas, there are a small number of thriving communities that may draw an outsize share of investors’ cash. In some cases, the law may boost returns on investments that would’ve happened anyway....Locally there hasn't been much talk about Salem's zones. A couple months back on FB there was a little bit of talk about how the entire downtown area was eligible, but nothing in detail, and nothing about our other zones.
Portland’s zones are so atypical that Barry Sternlicht, the real estate investor and founder of the Starwood hotel chain, used the city as a punchline when he criticized Congress for passing the tax breaks. “That’s not a blighted district,” he scoffed...
|Salem also has several zones|
- The whole of downtown, south to Mission and east to 12th/RR
- Much of Highland/Grant north to Pine Street, also bounded by the RR on the east
- The Edgewater District and a pigtail along the RR path to the Union St RR Bridge
- And the whole of the airport, McGilchrist, and Fairview Industrial area (but not the Mill Creek Industrial park area)
Opportunity Zones can deliver significant tax savings on medium- to long-term investments in economically disadvantaged communities. This new tax incentive pertains to both the capital gains invested initially through a qualified opportunity fund, as well as capital gains earned for the investor from businesses or projects in a zone.But the area in Salem that appears to have the highest "poverty density" does not seem to be included in any of the opportunity zones.
Each zone consists of an entire census tract, as established for the decennial U.S. Census. Tracts vary in size but generally align with population density. Oregon has 834 census tracts, more than 300 of which were eligible by meeting the definition of a "low income community" in terms of median family incomes or poverty rates. Oregon could nominate up to 86 zones, as each state was allowed up to 25% of its low income communities for designation.
The designations are in effect until December 31, 2028, and offer a predictable basis for private investment decisions over several years. Current federal law provides no means to change or add zones. As such, Oregon's nomination process entailed thorough analysis of all relevant census tracts for their potential and usefulness, as well as extensive outreach to the general public, federally recognized Indian Tribes, local governments, and other parties over a 3-month period. Aside from the opportunity zone nomination process, state government does not have an ongoing, official role under federal law. Nevertheless, Business Oregon is exploring ways to partner with others in furthering the use of zones for the benefit of Oregon communities.
from "Areas of High Poverty Density"
|"Very low income" areas from|
Salem River Crossing Project Environmental Justice
Technical Report Addendum (October 2016)
|Our Urban Renwal Zones|
- Will the Opportunity Zones spur investment in areas that are not already covered by an Urban Renewal Zone? This would mostly likely be along Broadway, Front, or Pine in the Grant/Highland area; and on either side of Mission Street between the airport and Four Corners, inside of I-5, a lot of which is prone to flooding, and may not be prime land for redevelopment.
- Inside Urban Renewal Zones, will canny developers and investors figure out ways to stack subsidies, so they get the tax benefit from the Opportunity Zone, and get a second round of Urban Renewal Funding as a grant? (And can even more benefit be stacked?) The apartments on State and Commercial, and the proposed hotel on Ferry and Commercial could be positioned for this windfall.
As Council and the City assess the budget and priorities in the Strategic Plan, they should give more thought to our system of subsidies and whether it actually delivers what we want. Consistently our "Economic Development" Reports to Council are thin on detail and assume optimism and fluff.* We rarely circle back and ask in a disciplined way, "Did it work out right? Did we get what we wanted?"
* Here's the most recent, from November. There's no attempt to assess whether the subsidies were necessary, and no attempt to assess the quality of project resulting from the subsidy:
URA grants continue to encourage private investment in development and redevelopment for the benefit of the community. During the quarter, the Riverfront-Downtown URA issued seven grants with a total City commitment of $448,537 and total project costs expected to be $1.4 million.
North Gateway URA grant funds were fully committed by the end of the first quarter; $1 million in funds was available starting on July 1st and fully committed by July 18th. North Gateway URA grant funds have leveraged over $3 million in private investment so far this fiscal year and continue to be in high demand.
For the West Salem URA, construction of three buildings continued at the corner of Glen Creek Rd NW and Wallace Rd NW with an anticipated grand opening date of spring 2019. Additionally, a $167,000 grant was issued to West Salem Machinery for new manufacturing equipment valued at $860,000 and adding four new jobs. A $300,000 grant was issued to NWRA West for the construction of a new healthcare facility valued at $3.4 million and adding 26 new jobs.
A couple of days ago The Oregonian reported that the sweetener is even more cloying with an intentional double-dip!
"Though the opportunity zone program is national, Oregon will feel the tax impact thanks to the state’s own tax code. It automatically mirrors the federal one, so Oregon is effectively offering the same discount a second time on Oregon tax bills."
(Probably also should have been clearer in discussing that the Opportunity Zones involve capital gains, and the tax increment from Urban Renewal Zones involves property taxes. Urban Renewal funds often get cycled back to projects in the forms of grants or loans. A developer could get a subsidy with a grant funded by Urban Renewal monies; and then get two additional layers of subsidy later with the capital gains breaks, one from the State, and one from the Feds. That's some City-State-Federal layer cake of subsidy!)
The story goes on to talk about what I think is the "Holman Hotel" concept for the Marion Car Park site:
"Sturgeon, whose other company, TMT Development, most recently completed the downtown Park Avenue West Tower, is recruiting opportunity zone investors for a $285 million mixed-use tower on one of three sites in central Portland, as well as the renovation of a $43 million downtown Salem hotel."
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