Fox File #71 "The O Zone"
The Fox Files is a weekly message from EDCUtah President & CEO Theresa Foxley.
I’d encourage you all to get familiar with “Opportunity Zones,” an aggressive new economic development tool resulting from recent federal tax legislation. O Zones are one of the most tax-advantaged ways to invest in new and existing businesses in qualifying areas all throughout the country.
The purpose of the O Zone legislation is to spur economic activity in low-income census tracts. O Zones reward patient capital by allowing investors to eliminate capital gains on investments made in opportunity funds that invest in qualified opportunity zone corporations, partnerships, and tangible personal property. Capital gains can be deferred and ultimately exempted under this new legislation.
Through a process managed by my good friend, Ginger Chinn, at the Governor’s Office of Economic Development, Utah designated 46 opportunity zones throughout the state. Those zones represent areas with about 204,000 residents, 272,000 jobs, and 16,000 businesses. Remarkably, in those zones, there are 31% of adults not working, a 24% average poverty rage, and a median income just under $46,000. As you can tell, the Governor’s Office certainly intended to designate zones that could benefit from job-creating capital investment.
This past week, the Governor’s Office of Economic Development hosted an informative session on O Zones. We learned a lot from the session and appreciate that GOED convened a great group of thought-leaders and investors on how to leverage O Zones and create strategies for investment. A few things we took away are:
1) The importance of collaboration: coordination between the public, private, and philanthropic sectors will be critical;
2) Capacity-building: success will depend on tapping into educational, community organization, foundations, and workforce programs; and
3) Local leadership matters: local leadership will be the mechanism by which the investment community is connected to low-income communities.
Because the program is national, our Utah-designated O Zones are not only competing for capital against each other; they are competing for capital against other O Zones throughout the country. Therefore, it’s important for local communities to get very strategic.
We were encouraged that several O Zones map to a number of potential Mega Sites throughout the state. Given the chance, we believe that equipment investment in these areas could result in outstanding corporate recruitment success. We look forward to additional guidance from the U.S. Treasury and to working with our local partners, our investment community, and the Governor’s Office to leverage this new tool.