Development officials in Connecticut say they are expecting to making substantial progress by the end of 2019 in marketing the state’s 72 federally designated Opportunity Zone sites.
The IRS recently released an updated set of regulations for investors in Opportunity Zone sites that clarify procedures under a tax benefit program established by the White House in 2017 as part of the Tax Cuts and Jobs Act. The program is designed to encourage private investment in lower-income areas around the country.
Connecticut has Opportunity Zone sites in 27 towns from the largest cities like Hartford, New Haven, and Waterbury to mid-sized and small communities like Meriden, Windham, and Putnam.
There is still more to be clarified at the federal level, but the state is preparing new materials to show what the sites have to offer and how they can add value for a private investor, David Kooris, deputy director of the state Department of Economic and Community Development, said.
“Our intent from the public sector in Connecticut is to really demonstrate why our zones make sense for investment,” Kooris said. “These 72 tracts are oriented toward our key assets and key strengths for growth that we have in the state. They’re in our downtowns and in they’re in our transportation corridors. We can say with confidence that you’re not going to be out there on your own in the wilderness, you’re going to be right there alongside us implementing our core strategies for economic growth.”
Kooris said the DECD has been meeting with officials in the 27 towns to talk about ways to make infrastructure investments and institute proper zoning to remove any impediments to smart development.
Residents shouldn’t expect the Opportunity Zone designations to be a magic pill, but the tax incentives involved could make a difference in projects that involved just a little bit too much financial risk for investors, he said.
Municipal leaders look at the Opportunity Zone regulations as a new tool to market existing development-ready sites. Properties like the old Showcase Cinemas in East Hartford and the town-owned Parkade site on Broad Street in Manchester could get the bump they need from a new way for private investors to raise money.
“In Manchester we feel like our Opportunity Zones cover two of our greatest areas of potential, economic-development wise,” said Gary Anderson, director of planning and economic development in Manchester. “It makes investment in a certain project more feasible, and it ramps up the incentive to make them even more financially-viable.”
The state isn’t expected to be a player in any Opportunity Zone development unless there are brownfield funds involved or needed permitting, but officials will work to encourage growth for the entire state, Kooris said.
Opportunity Zones have also been receiving attention from the state legislature recently. A bill proposed by state Sen. James Maroney, D-Milford, would require the DECD to host five regional workshops by Jan. 1, 2020, and conduct an extensive study of potential participants in OZ projects. The bill received a favorable vote from the Commerce Committee, and is expected to get a vote before the end of the June 5 end of the 2019 session, Maroney said.
CLICK TO VOTE ON SB 570: An Act Concerning Opportunity Zones
The bill would also direct the DECD to incentivize mixed-income housing development with low-interest state loans alongside the Opportunity Zone program.
“This year is an important year for investment in the Opportunity Zones,” Maroney said, because of the way the incentives are structured to encourage early investment. “We know that our cities and towns are critical to the growth of our state, and [Opportunity Zones] will help us attract development in critical areas and fill critical needs like housing.”
The recent IRS regulations solidified performance metrics and answered major questions about revenue production in OZ sites, said Liddy Karter, managing director for Connecticut at Enhanced Capital, a national investment consulting firm with a Stamford office.
“People are paying attention to this benefit and they seem to be interested in acting on it,” Karter said. “Existing plans and existing strategies were reinforced by the Opportunity Zone designations, and consequently it’s easier for investors and developers and businesses to want to be in these places.”
Karter said her firm is helping developers and investors learn about how to raise funding for projects in Opportunity Zones, and Enhanced Capital could potentially be an investor itself.
“Enhanced Capital has a whole history of investing in underserved communities, and we do that by leveraging tax incentives,” Karter said. “It’s a different benefit than we’ve had before, but we expect it to be a very different opportunity than we had before.”