Opportunity Zones: Wilmington explores potential benefits, holds forum to connect investors to projects

Updated: Jul. 18, 2019 at 6:28 PM EDT
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WILMINGTON, N.C. (WECT) - In recent months, local officials have grappled with the Cape Fear region’s dwindling supply of “affordable” housing.

Elected officials for both the city of Wilmington and New Hanover County have brought up the term countless times in discussing potential developments, economic growth initiatives or their campaign platforms. There was even a breakfast held to discuss some of the finer points of Wilmington’s housing needs, particularly in the wake of Hurricane Florence.

While public efforts continue, a new private investment tool might be the answer — at least in some areas of town — as the federal Opportunity Zone program is finally gathering steam.

Established through the 2017 Tax Cuts and Jobs Act, Opportunity Zones are designated census tracts where the government hopes to incentivize development through a tax break.

Individuals looking to save on their capital gains taxes — the money paid to the Internal Revenue Service on the profit made from the sale of an asset, such as a house or business — can put those gains into an Opportunity Fund. Those capital gains taxes are deferred for up to seven years. The money in the fund is allowed to grow, and any income made can be tax-free if it remains in the fund for 10 years.

The governor of each state was allowed to select up to 25 percent of the state’s low-income census tracts. In North Carolina, which has around 1,000 qualified tracts, 252 were selected based on feedback from local officials as well as the North Carolina Department of Commerce.

Congressman David Rouzer (R-NC7) was one of the 81 representatives who co-sponsored the bill.

In a statement to WECT Wednesday afternoon, Rouzer reiterated his support for the program he says will generate $100 billion in private investment nationwide.

“Opportunity Zones will be critically important tools to spur economic development and job growth in North Carolina," he said. “Each of the Seventh District’s nine counties includes at least one Opportunity Zone, and all of them are prime candidates for revitalization and investment – particularly as we continue to rebuild from Hurricane Florence.”

Former Wilmington resident and senior manager of regional community development for the Federal Reserve Bank of Richmond Jeanne Milliken Bonds explained while the rules attached to the final legislation establishing Opportunity Zones relaxed the requirements, the goal is still to benefit low-income communities.

“Ideally, what we would hope a community would see, is private investment that comes in, and helps to support their priorities," she said, "whether it’s affordable housing, or businesses, or other investments, but that you could directly see the impact for that community in the form of jobs that pay livable wages, as well as properties that are affordable for the people in that area.”

Typically, municipalities and other local governments have little ability to influence the specifics of private development.

Using Opportunity Zones, explained Wilmington Legislative Liaison Tony McEwen, city council and staff can potentially have a stronger influence, particularly when it comes to encouraging the development of affordable housing.

“This is going to be a new tool in the toolbox with affordable housing and public safety in particular," McEwen said. “So while, Council and the city staff don’t have the ability to completely direct how these investments are going to be made, [or] in what form they ultimately take, we do want to make sure that our voice is being heard and we have a seat at the table.”

A recent example is the former WAVE maintenance facility on Castle Street.

City staff recommended rejecting the only proposal submitted due not only to issues with scope and funding, but because Castle Street is in one of Wilmington’s Opportunity Zones.

At the meeting, the potential developers said they have begun looking into Opportunity Zone funding, and council members gave the project more time to find a potential investor.

Bonds has spoken at at least 45 seminars about Opportunity Zones, working to connect existing fund managers, potential investors and the communities in which the projects would ultimately take place.

She said she aims to explain the basics of the Opportunity Zone program to all of the stakeholders, and introduce investors to the communities so the priorities can be better understood, because having the community be a part of the process from the beginning is crucial to making sure investors are focusing on the right priorities.

“If you’re in a zone living there, working there, it can happen to you or can happen with you,” she said. "So the more programs we do where people can talk to each other and meet each other, the more likely it’s going to happen together.”

On Thursday, Bonds gave her presentation to several dozen community leaders at Wilmington City Hall.

Through a video chat, she was able to introduce managers of existing Opportunity Funds who answered questions about the mechanics of the tax incentives.

She then explained what she does, and how she works to connect all of the stakeholders.

There is no minimum amount to start an Opportunity Fund — and while there are tax benefits for those with capital gains, the funds are not limited to only those looking to avoid gains taxes.

With four Opportunity Zones, Wilmington has the most opportunity zones in the Cape Fear region.

Still, some neighborhoods that could use the economic growth were left out.

Community leaders from Wilmington’s Northside were at the meeting, despite the area not being selected as an Opportunity Zone.

They asked city officials why the area wasn’t chosen, when a tract next to UNCW was, and McEwen said the city could only suggest tracts, and that it was up to the NCDOC to make the final call.

He added, though, that there will soon be a separate meeting with state and federal elected officials to tour the Northside, and see if there are other programs that could benefit that neighborhood.

Buddy Milliken, a relative of Bonds but who is also a real estate developer in the Wilmington area who attended the session, said in his mind, the zones can assist neighborhoods outside of them.

“Even if an area is not in an Opportunity Zone, or it fails to receive Opportunity Zone treatment, the fact that there is an effort and initiative to identify problems in the community that need to be addressed, it’s sort of a flashlight to shine on those,” he said.

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