Vermont nominates ‘Opportunity Zones’ for federal program

Vermont is adding another program to its economic development tool box. The federal Opportunity Zones program awards developers with federal tax credits when they invest in economically stressed areas that meet certain criteria. 17 communities chosen, Springfield included.


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Vermont nominates ‘Opportunity Zones’ for federal program Business Vermont | April 07, 2018 By BRUCE EDWARDS CORRESPONDENT Some of Barre’s historic granite sheds are in a region of town that has been nominated for a federal program that rewards development investment. (Jeb Wallace-Brodeur / Staff Photo) Vermont is adding another program to its economic development tool box. The federal Opportunity Zones program awards developers with federal tax credits when they invest in economically stressed areas that meet certain criteria. The program was included in the Tax Cuts and Jobs Act of 2017 that was signed into law late last year by President Donald Trump. Vermont nominated 25 out of more than 100 “census tracts” as Opportunity Zones within 16 communities across the state, including Rutland and Barre City. Gov. Phil Scott last week submitted the list to the Department of the Treasury. To qualify, each area or census tract was selected based on its poverty level, unemployment, number of jobs, businesses, and number of residents, said Tom Brady, deputy secretary of the Agency of Commerce and Community Development. “Layered over that were potential projects in the pipeline because this entire program is meant to attract private capital to make equity investments in businesses and entrepreneurship,” Brady said. He said investments in an Opportunity Zone project would be made through the creation of an Opportunity Fund. The program is similar to another federal program, New Markets Tax Credits. Both use the same eligibility criteria but Brady said the tax mechanism for both programs is much different. It’s his understanding the Treasury Department is working out the details on how the program will function. “We’re waiting on Treasury and IRS to issue guidance on creation of the funds which will be used in these Opportunity Zones,” Brady said. He said the guidance to date is that investors in an Opportunity Zone Fund can reduce or defer their federal tax liability on the income put into the fund and invested in a project. One question the IRS needs to answer is who will be eligible to establish an Opportunity Zone Fund and who or what entity can invest the funds, Brady said. Within the Treasury Department, oversight of New Markets Tax Credits falls under the auspices of the Community Development Financial Institutions Fund. Rutland’s downtown is an area nominated for the Opportunity Zone designation, a federal program that awards investment. (File photo by Jon Olender) In Rutland, three of the four census tracts or quadrants of the city are eligible, said Brennan Duffy, executive director of the Rutland Redevelopment Authority. Only the Northeast section failed to qualify because it has a low unemployment rate and a higher income, Duffy said. Like Brady, he said it was too early to gauge the potential economic impact. Duffy said the nominated Opportunity Zones in the city are contiguous with the New Markets Tax Credits eligible zones. Those tax credits played a major role several years ago in helping to fund a major downtown project. “The CCV (Community College of Vermont) project was funded in part with New Markets Tax Credits and we are looking right now at the redevelopment of a downtown hotel,” Duffy said. He said the tax credits are seen as critical to the project moving forward. Janet Shatney, Barre City planning director, said the Opportunity Zone program could encourage new development in the heart of the city. “It appears that the portion of Barre City that’s been nominated is most, if not all, of the downtown,” Shatney said. “I think it’s a great benefit to the city and hope developers take advantage of it.” Joel Schwartz of the Barre Area Development Corporation, said the location of the Opportunity Zone, southwest of Main Street could also be a boost to the granite industry. “The granite sheds are old,” said Schwartz, the association’s executive director. “Some of them may need some modernization in terms of equipment, though that’s ongoing.” Schwartz said the city has already benefitted from the New Markets Tax Credits. He said that program helped fund in part the $16 million Barre City Place. Schwartz added that the New Markets Tax Credits are designed for investments that are $1 million or more. If the Opportunity Zone program has a lower threshold that would benefit smaller projects, he said. In announcing the Opportunity Zones nominations, Gov. Phil Scott said the goal is to spur private investment. “I hope this new designation spurs private investment in Vermont businesses and communities, which will be beneficial to my administration’s work to grow the economy,” Scott said. “I am proposing designating 25 census tracts in 16 different communities across the state, giving each of them a new tool to attract private capital and spur job creation and community development.” In nominating the 25 census tracts in the 16 communities, the Agency of Commerce began with more than 100 federally recognized eligible census tracts around the state. The program limits the number that can be nominated to 25 census tracts. According to the state, approximately 85,000 Vermonters, including 18,000 who live below the federal poverty level, live in the proposed zones. The selected zones also include 7,470 businesses. The state’s recommendations include the following communities: Barre City — southwest of Main Street. Bennington — downtown and north. Brattleboro — downtown. Burlington — waterfront, Pine Street Corridor, downtown. Johnson Lyndon — downtown Lyndonville and west of Broad and Main streets. Newport City Randolph Rockingham — Bellows Falls village Royalton Rutland City — downtown core, west, and south. St. Albans City — west of Main Street. St. Johnsbury South Burlington — including City Center. Springfield Vergennes Winooski