Iowa City leaders have found a piece of the Republican agenda they like.
The state submitted applications this month for federal “opportunity zone” designations, which will provide tax breaks to developers who make investments in low-income areas, as part of the Republican-led Congress’ 2017 Tax Cuts and Jobs Act. Iowa’s 62 potential zones proposed by Gov. Kim Reynolds, including two in Iowa City, are now up for federal review.
Iowa City’s key economic metrics are strong, largely driven by the University of Iowa. At 2.5 percent in February, the area’s unemployment rate ranks the fifth-lowest in the nation, according to federal labor statistics.
However, the city’s economy also faces several often-overlooked challenges.
The median home value of nearly $200,000 is about 40 percent higher than the state average and rental prices are among the Midwest’s highest. Elementary schools in and around the proposed zones have high portions of students qualifying for free or reduced price lunch, a common metric for measuring poverty.
Iowa City is suffering from the same changes in manufacturing and retail industries as other communities across the country. Layoffs announced in the past two years at just a few firms — including Procter & Gamble, Kmart and International Automotive Components — total more than 1,000. Analysts also expect a “ripple effect” for others in those companies’ supply chains.
And city leaders have repeatedly complained about the impact of the 2013 statewide property tax reform package, which reclassified multi-residential units, reducing city revenue by $1.6 million already, administrators say.
“Iowa City has pockets of poverty and disinvestment that are largely unrealized by the rest of the state due to mainstream perception and media reports focused on other aspects of the community,” Iowa City officials wrote in their application to the Iowa Economic Development Authority.
The government has not yet published details about how the program will function, but some observers say the impact could be significant. People who invest in projects within opportunity zones would see bigger cuts on capital gains taxes depending on how much and how long they invest.
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That would be a welcome boost for the two tracts on Iowa City’s south side, not far from my childhood home. Those neighborhoods are filled with poor and working-class families, rather than the high-salaried university professors Iowa City is known for.
Expanding manufacturing and retail in those areas would help diversify Iowa City’s job offerings. And city staff members have already been in communication with apartment developers who say the opportunity zone incentives could lead to affordable housing.
“This program is exactly what the commercial and industrial areas identified in the application need,” Iowa City Area Development Group President Mark Nolte wrote in a letter of support.
I often am skeptical of economic development strategies, which are ripe for cronyism and often ignore the neighborhoods most in need. But in this case, Iowa City officials are on the right tracts.
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