A new federal program gives investors a tax incentive to invest in low-income areas. Despite mixed feedback from the public, investors and state and city officials are hopeful the program will bolster Utah’s economy.
The Opportunity Zones Program was introduced as part of the 2017 federal tax reform legislation. It allows investors to defer federal tax liability on capital gains by placing their profits in Qualified Opportunity Funds. These funds are set up as partnerships or corporations that will invest in eligible areas, called Opportunity Zones, which are characterized by economic distress.
Provo is one of those zones.
Some worry the program will only reward investors for making investments they would have made anyway. According to Ginger Chinn, managing director of urban & rural business services in the Utah Governor’s Office of Economic Development, this isn’t true.
“There may be areas where investors see projects that they may not otherwise see,” Chinn said.
Jeff Danley, co-founder of Utah-based venture company Peak Ventures, said the program “will encourage investment in those opportunity zones where otherwise there might not have been as much development.”
Val Hale, the executive director at Utah Governor’s Office of Economic Development, said he agrees with Chinn and Burningham. Hale said investors usually won’t spend money in areas that are not doing well economically, but this will change with the program.
“This program opens the door for investment to flow into some of these distressed areas,” said Hale. “I think you will see money flowing into those areas.”
According to Danley, a lot of people are still unraveling the program. “We’re having a hard time figuring out how to make opportunity zones work for us, and I think that’s true for a lot of developments and investors,” he said.
Danley said the program doesn’t quite fit into what they’re used to doing.
“We’re trying to find the best companies to invest in,” said Danley. “We’re not in the business of telling them where they have to locate. If we happen to find an investment located in an investment zone, that’s great.”
Due to challenges like this, Planning Director for Mountainland Association of Governments Shawn Seager said he believes each city needs to decide how to market the individual opportunity zones within their boundaries.
“There really is no action that we can take as an organization on these opportunity zones,” Seager said. “It’s really left up to the cities to try to pursue the tax initiatives that are offered.”
Provo City Business Development Coordinator Cameron Christensen said the city is currently coming up with a strategy on how to market the city’s opportunity zones.
“This is a fairly new program,” said Christensen. “We’re still kind of going down that road of how to properly market them and how to make developers aware of the locations in Provo.”
Even though the program is in its infancy, Christensen said he is hopeful.
“Provo is in a unique position,” he said. “We’re looking at all types of investments in Provo. We’re always willing to have a conversation with any type of investor.”
Possible development types range from affordable housing to retail spaces. Christensen said specific development types will be a question of zoning.
One common criticism of the program is that it will only serve to make the “rich” richer. Christensen said that’s not the case.
“It’s not just appealing to the rich,” Christensen said. “If Sally Sue and Joe Shmoe want to take the capital interest from selling their house and invest it into these opportunity zones, they can absolutely can do that. It’s all under the umbrella.”
Chinn said it’s possible, but she believes it’s still too early on to see how things will play out.
“A lot of the rules to the game have not been established,” said Chinn, referencing the fact that the nation is still waiting on the U.S. Treasury to disseminate all the information on how the program will play out.
Regardless of what information has yet to be released, Chinn said, “It behooves us to try to see how it will work.”