Opportunity Zones aren’t a “magic bean” from which development will sprout in the Corridor, nor will they bail out a “bad” deal.
But through the federal program, Iowa developers can link up with investors interested in tax benefits and pursue projects that otherwise might not be cost efficient, said Mark Nolte, president of the Iowa City Area Development Group.
Groups of 20 to 30 people, among them local developers, attended ICAD-sponsored presentations on Opportunity Zone possibilities in Coralville and Iowa City Thursday, and in Cedar Rapids Friday.
The Opportunity Zone program, established through the 2017 Tax Cuts and Jobs Act, nets investors varying degrees of relief on capital gains taxes, depending on the length of investment in 8,762 designated low-income urban and rural census tracts.
Investors can defer capital gains tax payments for the duration of investments under five years and progressively reduce their tax liability for capital gains up to 10 years, upon which they are exempted entirely.
At each meeting, a representative from the host city presented on its Opportunity Zone tracts — three in Cedar Rapids and two apiece in Coralville and Iowa City — detailing both existing development and future projects officials envision with them.
“We understand these things take time, but we’re really hoping that the Opportunity Zone is an impetus and really helps move some things along that much faster,” said Ellen Habel, Coralville’s assistant city administrator, regarding the 180-acre mixed-use Iowa River Landing.
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Other potential project areas discussed at the meetings included Coralville’s Southeast Commercial District; land bordering Riverfront Crossings park and the former ACT McCarrell Center in Iowa City; and much of Cedar Rapids’ core, including downtown, the MedQuarter, the New Bohemia District and Kingston Village.
Nolte said that at a recent Denver conference, he was “hounded by investors” interested in Iowa projects and “under the gun” to invest in Opportunity Zone initiatives by the end of 2019 — when the legal window closes for them to maximize tax savings under the program.
Most investors are not seeking to remain in the zones longer than 7 to 10 years, and they’re more interested in the prospective tax savings than their return on investment, he continued.
That means developers are in the “driver’s seat” to broker agreements over a broader array projects and businesses than might be feasible under other tax credit programs, including child care centers, affordable housing and not-for-profits, Nolte said.
“They’re looking for places to park the capital,” he said. “They need the local government community to put together deals.”
ICAD representatives said they keep an email list of about 700 investors nationwide that the group can use to see if there are any takers for Opportunity Zone projects in the Corridor.
Chris Nicknish, business development representative with Iowa City-based Calacci Construction Co., said he sees potential for affordable housing near Kirkwood Community College’s Iowa City campus, within an Opportunity Zone, but noted that rezoning the land could pose a challenge.
Mike Carberry, director of Green State Solutions in Iowa City and a former Johnson County supervisor, said after one of the meetings that he is consulting for Silicon Valley-based Pivotal Capital, which has formed an Opportunity Fund to invest in renewable energy projects.
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Carberry attended all three Opportunity Zone meetings to gather information and learn more about brownfield sites, such as the former Sinclair meatpacking plant site, to consider redeveloping, he said.
“You might not want to have people live on that ... . Instead of building a development where people work, live and play, why not put a solar farm on it?” he inquired.
Carberry said such a project could allow for the “layering” of multiple other types of tax relief beyond the Opportunity Zone savings, such as state brownfield and federal solar tax credits, but “the clock is ticking” on making necessary arrangements.
“That might be the biggest challenge, to get the project well-formed enough to make sure you qualify for those credits,” he said.
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