A new federal tax shelter could kickstart a wave of investment in Pittsburgh and Pennsylvania. At a forum hosted by the Hill Community Development Corporation last Friday, opportunity zones were hailed as catalytic, transformative and lucrative.
The opportunity zone designation was created by the Federal Tax Cut and Jobs Act of 2017. In 2018, governors of each state nominated low- to moderate-income census tracts for approval by the U.S. Secretary of the Treasury. People who invest capital gains in one of the more than 8,000 opportunity zones across the country could pay zero taxes on what that money earns — if they leave it alone for 10 years.
The legislation is the first substantial economic development plan from the federal government in 15 years, and will direct scarce capital into communities that really need it, said Irvin Henderson of Henderson & Company.
The U.S.'s rate of new business creation has been anemic in recent years and, “entrepreneurial activity has dried up the fastest in the places that can least afford it,” he said. “This is designed to say to the entrepreneur, here’s an extra incentive for you to develop something in our communities.”
Opportunity zones are not a panacea, agreed David Byrd, deputy assistant secretary in the U.S. Department of Housing and Urban Development’s Office of Policy Development.
“I like to say that opportunity zones will not make a bad deal good, but it will make a good deal better,” he said. “We want to make doubly sure that the folks that live in these communities get to benefit from the influx of this capital.”
While opportunity zones are intended to attract long-term investment to generate jobs and economic development, many worry a sudden influx of money could speed up gentrification. It’s something to guard against, said Henderson, but accountability doesn’t disappear in opportunity zones.
“It still has to be controlled by local ordinances, by local community groups, by local processes,” he said.
The federal government has issued some guidance on how the program will function, but there’s still work to be done to prevent negative pitfalls, said Marimba Milliones, executive director of Hill Community Development Corporation.
“That can all be managed through good legislation,” she said. “It’s our job to make sure that that happens, as a community and also as investors.”
Twenty-seven of Pennsylvania's 300 designated opportunity zones are in the City of Pittsburgh, and include parts of the Hill District, Homewood, Marshall-Shadeland and Hazelwood, among other neighborhoods.