The tax reform package of 2017 included a program allowing governors to establish areas known as Opportunity Zones in their respective states, as a way to encourage private investment in low-income areas. The program provides a tax incentive for investors to re-invest their unrealized capital gains into Opportunity Funds that are dedicated to investing in census tracts where wages are low, but opportunities for growth exist.
The catch is that all 50 governors must designate which zones they want considered for the program by March 21. In state government time, the interval between the passage of the tax reform package and that deadline is the proverbial blink of an eye.
In Tennessee, it wasn’t until late February that the Haslam administration put in place a mechanism by which each of the 95 county governments would inform the Department of Economic and Community Development which of its potential sites it would like to make eligible. In Northeast Tennessee’s eight counties, there are 92 potential opportunity zones. The state wants each county census tract list by March 7. Only 25 percent of each state’s census tracts will be considered for Opportunity Zone status.
The First Tennessee Development District is assisting Northeast Tennessee’s county mayors in making their determinations. Ken Rea, the FTDD’s community development coordinator and deputy director, says the process is simpler in some counties than others. “In Johnson County, for example, all the industrial parks and the downtown area is in one track of the five they have. In Carter and Greene counties, though, it gets a little more complicated. We have to try to make sure we cover commercial areas, industrial areas and areas where in the future there might be a good possibility for residential development.”
Proponents say there are great reasons to be excited about the possibilities Opportunity Zones may create. “First and foremost, if there’s any opportunity for investment in our region that helps the median income increase, that’s a win-win for everybody,” says Ron Scott, CEO of Appalachian Community Federal Credit Union. “It’s more jobs and a better quality of life.”
In addition, Scott says, “the census tracts that qualify include Tri-Cities Airport, so Aerospace Park is a piece of this. So you’re putting another layer of opportunity to bring in the big guns to help us progress.”
Detractors of the program say it’s just another incentive that will only shift the balance toward investing in an area if that area is already under serious consideration.
And even Scott and his fellow proponents are critical of the hurried timetable. The federal government is slated to announce which tracts will become Opportunity Zones in April. “I do wish the federal government had taken the opportunity to roll this out more deliberately, especially since it is this important. It’s certainly not the state’s fault they have this deadline by which they have to respond.”