City and state officials want to take advantage of a new federal tax incentive to encourage investment and job growth in the city's downtown and along the waterfront.
The Opportunity Zone program encourages private investment by allowing people who will see profits on their investments — but haven't cashed them in yet and paid taxes on the capital gains — to instead reinvest that money in Opportunity Funds in exchange for tax benefits. The funds then become specialized financing vehicles to spur development in these targeted zones.
For example, the restrictions placed on development in a Designated Port Area — such as Gloucester Harbor — can often become obstacles to securing bank financing on projects, says city Community Development Director Jill Cahill. These Opportunity Funds could help resolve that problem.
"This can help attract new investment in the harbor," Cahill said, but clarified the city is not necessarily eyeing particular properties with this program. She said the program will hopefully dovetail with the city's ongoing efforts on improving public infrastructure, city facilities and other projects.
The Opportunity Zones are based on federal census tract information and specifically targeted to low-income neighborhoods, with the aim of generating job growth and increasing the commercial base and private investment in those areas.
The two zones in Gloucester essentially cover the waterfront and downtown, and stretch out to the O'Maley Innovation Middle School in one direction, over to Gloucester Crossing and the Fuller School property, and along Route 128 to Bass Avenue.
"We're hopeful that the designation highlights that Gloucester is here and we're open for business," said Cahill. "It's one tool of many."
The Internal Revenue Service explains a Qualified Opportunity Fund this way: "An investment vehicle that is set up as either a partnership or corporation for investing in eligible property that is located in an Opportunity Zone and that utilizes the investor’s gains from a prior investment for funding the Opportunity Fund."
Earlier this month, the U.S. Treasury Department announced that all of Massachusetts’ Opportunity Zone designations were approved, including the two in Gloucester, one in Beverly, two in Peabody and two in Salem. In total, Gov. Charlie Baker's administration had recommended 138 zones, the maximum allowed under the new program, which are located in 79 cities and towns across the state.
“Our administration looks forward to building out the program to advance job creation and economic activity in every county of the Commonwealth,” said Baker in an announcement.
State officials highlight that 32 of the 138 designated zones are in the 10 communities with the lowest median family income in Massachusetts. Additionally, 48 percent of them are in Gateway Cities.
“Our near-term focus is ensuring communities have the tools they need to position their Opportunity Zones as attractive investments," said Housing and Economic Development Secretary Jay Ash. "We will continue to work with them ... to advance their economic growth agendas.”
The program is still very new, Cahill said, and many details are still being ironed out. She said she expects more specific information will be available at a briefing session the state is planning for mid June with cities and towns in the program.
John Castelluccio can be reached at 978-675-2708 or email@example.com.
Check out the Opportunity Zones online
Use the mapping capabilities on the U.S. Treasury’s website, following the instructions below, to zoom in on each Opportunity Zone.
1. Go to https://www.cims.cdfifund.gov/preparation/?config=config_nmtc.xml. This will open a map in your main browser. It requires Java to be enabled.
2. Click on the arrow in the upper right portion of the map (under the search function) to bring out a menu.
3. Click on the checkbox for 2011-2015 LIC Census Tracts to unselect it.
4. After Step 3, the menu should have only Opportunity Zone Tract Designated and State checked.
5. Zoom in on Massachusetts, or communities of interest, to review where the Opportunity Zones have been placed.
You can also check out the state's Opportunity Zone page at www.mass.gov/opportunity-zone-program.