The Tax Cut and Jobs Act, passed on December 18, 2017, included the Opportunity Zone program, which gave states a chance to nominate low-income areas with the potential for long-term investment to be targeted for tax incentives. Designated by the U.S. Department of Treasury, Ohio’s 320 Opportunity Zones began generating attention from investors interested in taking advantage of favorable tax benefits (State of Ohio).
On June 14, the legislation was extended by Governor Mike DeWine through Senate Bill 225. The Toledo Regional Chamber of Commerce advocated for increases from the program.
To look closer at Ohio Opportunity Zones (OOZs) and how they are used in the Toledo area, Toledo City Paper spoke with Toledo Area Chamber of Commerce’s Stacey Mallet, Vice President of Membership and Marketing; Brian Dicken, The Chamber’s Vice President of Advocacy and Strategic Initiative and Keith Burwell, President of the Greater Toledo Community Foundation.
Ohio Opportunity Zones help fund projects that would otherwise not be financially viable at sites that might not otherwise draw the attention of investors. “The Zones are a great way to encourage investment in areas that have, quite frankly, been neglected in the past, and they really help redevelop the community in ways we haven’t seen before,” Dicken explained. Chosen projects operate on slim margins, so the idea is to create a funding vehicle that allows for long-term investment. “Anything we can do to make it easier for investment to come back into the community; we all win by that.”
“The upside is the Zones were created to help individuals who have capital gains issues. It’s a tax play on one side and an investment play on the other,” Burwell said.
OOZ tax credits equal 10% of a person’s investment in Ohio’s qualified opportunity funds that are invested in projects within designated zones. The credit is nonrefundable and may be claimed against an individual income tax for the year of or the year after a qualifying investment is made. Any unused credit can be carried forward for up to 5 years (Toledo Regional Chamber of Commerce).
Bias toward bigger cities
As with other Federal programs, there is a concern with how these monies for the program are utilized. Despite being created with mid-sized communities like Toledo in mind, larger metropolitan areas like Cleveland and Columbus end up receiving a disproportionate benefit from investment dollars.
“If you look across the country, all the big projects are in the big metros. Which wasn’t how they were designed. It’s hard for us,” Burwell said. Two unnamed investors in town, for example, are using Opportunity Zones in Boston and San Francisco. “On a twenty-story high-rise (in a larger market), you’re going to get a return on your investment ten times faster than you would in Toledo.”
“Toledo is a poster child for why Opportunity Zones should work. When we submitted the zones, we had only one little area that was [originally] excluded, and that was around Promedica (Toledo Hospital on Monroe St. and N. Cove campus and surrounding census track),” Burwell said. “There are 17 in Toledo,” Dickens said, and as of June 21, there are 23 Zones throughout Lucas County.
Areas of focus
The Toledo Community Foundation has organized projects for many area beneficiaries including:
-Overland Industrial Park (two projects)
-Generations Tower (Promedica; Toledo Hospital)
-St. Vincent Medical Center (four projects)
-Woodruff Village Apartments
-Toledo Museum of Art
-Uptown Toledo (Ebeid Center, Nexus Health, and grocery store)
-Renaissance Senior Apartments
-Downtown Headquarters (Promedica, Renaissance Hotel, Tower on the Maumee)
-Dorr and Collingwood (LMHA Project for grocery market and mixed-use development)
-Metzger Produce Building
-Ironville (rail terminals and freight transportation accessibility)
-Main and East Broadway (East Toledo affordable housing)
-Marina District (restaurant, office/retail space, residential units)
-Toledo Zoo and surrounding census tract
-Four unspecified projects with “high likelihood of project completion” (Jeep Parkway, Uptown, Downtown, and East Toledo)
A full OOZ list can be downloaded at opportunityzones.ohio.gov/resources.
The key to these projects, and to taking advantage of future opportunities, has to be collaboration. While working together may not always be ideal for competing investors, it is the only way to move forward as a community. With awareness and education, the impact of incentives like Opportunity Zones will continue to encourage development and, hopefully, spill over into neighboring communities.