In the U.S., the Opportunity Zone program is widely criticized for being poorly designed, with key elements poorly defined. It also catches flak for being more focused on providing tax breaks for the wealthy, rather than equitable revitalization for the target communities. But with the right support from state-level programs, many of those weaknesses can be remedied. New Jersey is one state that seems to be making such an effort.
“Working hand-in-hand with community partners is critical to ensuring Opportunity Zone investments have the greatest possible positive impact. The Opportunity Zone Challenge facilitates the close partnerships between the NJEDA and municipal, county, and local leaders that are critical to realizing each community’s vision for equitable, inclusive revitalization,” said New Jersey Economic Development Authority (NJEDA) Chief Executive Officer Tim Sullivan.
On November 14, 2019 NJEDA announced that five New Jersey communities that will receive grants of $100,000 each through the Opportunity Zone Challenge Program: Cumberland County, Hackensack, Flemington Borough, Paterson, and Jersey City have each won through the program. The plans will support efforts to attract community-supported Opportunity Zone investments, build investment readiness, and help the community to meet its goals for Opportunity Fund investment.
“The five plans that will receive funding through this round of the Challenge represent the kind of proactive thinking we need to not only address the challenges we face today but also to lay the groundwork for long-term, sustainable economic growth,” Sullivan continued.
Championed by Senator Cory Booker, the Opportunity Zone program is a federal tax incentive designed to spur investment in the most disinvested rural and urban communities. The program includes over 8,700 Opportunity Zones in all 50 states, Puerto Rico, Washington DC, and the US territories.
Through the program, private investors with capital gains can make investments in Opportunity Zone business equity or real estate projects through Qualified Opportunity Zone Funds, which are purposely designed to be long-term capital investments. The program grants tax breaks based on length of the investment. New Jersey employed a detailed, community-focused selection process to designate 169 zones in 75 communities, with at least one in each county.
While the Opportunity Zone program is designed to focus capital flows and economic investment into communities that have historically faced economic challenges, long-term investment scarcity and strained local governments have made it difficult for many of the communities most in need to develop and capitalize critical projects. The NJEDA developed the Opportunity Zone Challenge Program to help address this problem by encouraging communities to come up with specific plans for pursuing Opportunity Zone-based investments.
“Helping communities establish a strong foundation for attracting Opportunity Zone investment is critical to ensuring resources flow to projects that will have the greatest impact,” said Leslie A. Anderson, CEO and President of the New Jersey Redevelopment Authority.
“The Opportunity Zone Challenge is an important piece of this puzzle that allows communities to develop the institutional capacity they need to make most of the Opportunity Zone program,” she added.
The first round of applications for the Opportunity Zone Challenge opened on August 1, 2019 and concluded on September 16, 2019. Of the 22 applications submitted, the NJEDA selected five communities to receive grants.
The five projects receiving funding are:
- Cumberland County: The Cumberland County plan is a combined marketing and regulatory reform initiative built around a microtargeting-driven marketing campaign focused on attracting Opportunity Zone investment, a county-specific Opportunity Zone website, and stakeholder meetings. Regulatory reforms included in the plan will consist of an in-depth analysis of areas in need of redevelopment and rehabilitation in Cumberland County Opportunity Zones as well as the implementation of policies that will support community-backed projects;
- Hackensack: The Hackensack plan will facilitate the Hackensack Life Science Zone Assessment Report. This report will build on the Bergen Life Science and Technology report, which found that specific areas within the City of Hackensack’s Opportunity Zones would serve as a feasible location for the construction of a life science park. The Hackensack Life Science Zone Assessment plan will further investigate these areas to assess their conditions and determine whether they are suitable for the creation of life science zone. The city will partner with the Hackensack University Medical Center (HUMC) to provide technical expertise and industry data that will guide the planning process. Once this plan is complete, the City will have the information it needs to designate the tract as an area in need of redevelopment for life science purposes;
- Flemington: The Flemington plan includes a series of charettes (in-depth community stakeholder meetings) to help create community participation in Opportunity Zone strategic planning, a borough-wide examination of zoning to reduce regulatory hurdles and encourage development, and new project marketing plans designed to showcase Flemington’s Opportunity Zone investment projects;
- Paterson: The Paterson plan will examine street-level zoning codes and regulations in each of the City’s eight Opportunity Zones to ensure investors have the information they need to successfully guide a project to completion. The Paterson plan will increase the City’s short-term capacity to attract Opportunity Zone investments by providing a user-friendly catalogue of zoning codes and regulations and will increase long-term capacity by jumpstarting efforts to update antiquated redevelopment plans in a way that capitalizes on the Opportunity Zone program; and,
- Jersey City: The Jersey City plan will consist of an in-depth, partner-oriented financial feasibility study leading to an investment prospectus to enhance the infrastructural and economic capacity of the two Opportunity Zones located in the Journal Square neighborhood, which is poised to be the Jersey City Cultural Arts District. The Jersey City Department of Planning will hire a consulting firm and work with identified strategic partners to conduct a financial feasibility study of Journal Square. The project team will then use this study to create a financial prospectus showcasing the advantages of investing in the Journal Square Opportunity Zones.
In addition to the Opportunity Zone Challenge, the NJEDA has recently rolled out a variety of initiatives aimed at attracting investments in inclusive, equitable development that promote business growth and job creation, especially in communities that have been passed over by developers in the past.
These resources include the recently-launched Opportunity Zone Marketplace – an online portal designed to connect investors nationwide with business investment, real estate, and community improvement projects in Opportunity Zones – and New Jersey’s Opportunity Zone “One-Stop Shop” website, which includes a Community Asset map with data on all the 75 Opportunity Zones and guides for preparing a project pipeline and connecting shovel-ready projects with Opportunity Zone fund investors.
Featured photo courtesy of the City of Hackensack.