‘Opportunity zones’ aim to give neighborhoods an economic boost
Ten years after the Great Recession, the economic recovery has skipped over some long-downtrodded neighborhoods such as Pine Hills and Parramore.
“When the West Oaks mall [west of Pine Hills] began to degrade, you ended up with anywhere from 60 to 80 stores that are empty,” said state Rep. Bruce Antone, whose district includes parts of Pine Hills and Parramore. “Think about it: if each one of those stores has five to 10 jobs … that’s a lot of jobs in that community.”
Pine Hills and Parramore in downtown Orlando were among the 427 low-income areas across the state, including 39 in Central Florida, designated as “opportunity zones” on April 19 by Gov. Rick Scott. It’s part of a new initiative included in the federal tax law passed last year designed to encourage investments in low-income areas left behind by the economic recovery.
Antone is optimistic about the program but wants to guard against gentrification and ensure new investments help current residents, not just investors.
“The intent and the purpose of the opportunity zones are good,” Antone said. “It’s just the devil is in the details.”
Other Central Florida areas designated as opportunity zones include parts of Altamonte Springs, Apopka, Kissimmee, Poinciana and Sanford. The program also is designed to boost rural areas, including parts of Groveland, Leesburg, Eustis and northern Lake County.
If approved by the U.S. Treasury Department, investors could see substantial benefits for putting money into those areas.
Investors with unrealized capital gains are taxed at a maximum 20 percent federal tax plus a 3.8 percent surtax when they sell. If they invest that money in an “opportunity fund” that helps set up new businesses or helps existing companies expand in the targeted areas, they could defer those taxes.
Keep the investment for seven years, and an investor would pay 85 percent of the taxes due on the original gains. Keep it for 10 years, and an investor would avoid all taxes on gains made from the opportunity fund.
U.S. Sens. Marco Rubio, R-Miami, and Tim Scott, R-S.C., who led the push to include the program in the GOP tax cut plan passed by Congress last year, say it will revitalize impoverished areas.
The opportunity zones program “would make it more attractive to invest in many of the areas left behind by the global economy, creating jobs and increasing wages for the workers and families,” Rubio wrote in an April 3 letter to Scott.
A similar state program targeting low-income “enterprise zones” for tax incentives, however, was shut down by lawmakers in 2015 after analyses showed it cost the state more money than it generated.
A report by state economists found that “the program primarily captures or shifts existing economic activity, rather than inducing new economic activity to the state.”
Dale Brill, vice president of research for the Orlando Economic Partnership, said the new opportunity zones program is structured differently and is likely to spur more investment than the defunct state program. The incentives being weighted toward long-term investment will encourage lasting growth in those areas, he said.
But Brill also echoed Antone’s fear that it could benefit the neighborhood but not the people in it, negating the purpose of the program in the first place.
“Economic growth is necessary but not sufficient,” said Brill, a former top economic development adviser to Govs. Jeb Bush and Charlie Crist. It has to be tied to programs that develop job skills for workers in the area, he added.
If it ends up working for the citizens of Pine Hills and not just the zip code, Antone will be pleased.
“If they came in and bought up one of those strip shopping centers and they got the tax break from that, that could be very good for the community,” Antone said. “It’s not necessarily a bad thing. We have to keep our fingers crossed.”