Sunday Focus: Local officials say Opportunity Zones could help area

Published 12:46 am Sunday, December 16, 2018


NATCHEZ — President Trump signed an executive order Wednesday establishing “Opportunity Zones” in more than 8,700 distressed communities in the United States that will be able to offer tax incentives to long-term investors in those areas.

Although the executive order was signed Wednesday, area leaders said they have been working for the past year to gain Opportunity Zone statuses in the Miss-Lou.

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Trump’s Tax Cuts and Jobs Act, signed into law in December 2017, included a provision creating the Opportunity Zones, which are in areas of the nation still struggling to recover from the Great Recession of 2008.

Since the law’s passage, governors of each state have identified areas within their states that qualify to be “Opportunity Zones” and eligible to offer the tax incentives.

Miss-Lou Opportunity Zones

Chandler Russ, executive director of Natchez Inc., said three areas inside Adams County and the industrial park in Vidalia, applied for, and were accepted and approved to be, certified Opportunity Zones.

The three Adams County certified Opportunity Zones, Russ said, are the industrial port area, including the former Belwood Country Club and former International Paper properties on the south side of Natchez along the Mississippi River, downtown Natchez from the riverfront up to Arlington and Orange avenues, and the Natchez-Adams County Airport and surrounding properties, including industrial sites along Martin Luther King Jr. Road.

“We wanted to make sure we take advantage of the federal incentives and programs to continue to make the area attractive to businesses and industry,” Russ said of working to gain certified Opportunity Zone status.

Although the Opportunity Zones have been created and approved, the finer points of the funding mechanisms are still being ironed out, Russ said.

“We got the three (Opportunity Zones) we requested and approved by the treasurer, the next step is to put them into use,” Russ said. “We are in a bit of a waiting period to see how some of that works out.”

Russ said the incentives, will offer capital gains tax breaks to investors in Opportunity Zones.

“Being able to shelter the capital gains from capital gains tax — how much you get to shelter or avoid — depends on how long you deploy those gains into a project,” Russ said.

He offered the following hypothetical scenario as an example: A company makes $2 million off the sale of property that is subject to capital gains tax. The company takes $2 million and invests it in a property or business expansion or acquisition in an Opportunity Zone and avoids paying capital gains for up to 10 years.

Capital gains tax savings can be as much as 30, 40 or 50 percent, depending on the length of the investment, Russ said, adding such savings on investments could help level the playing field when recruiting and retaining businesses in an Opportunity Zone.

“It is a huge opportunity,” Russ said. “Still some issues (are being worked out) with the treasury and IRS on how to work out details on capital gains before they can be deployed and how best to do that. We hope to have final rules and regulations regarding that shortly. They keep kind of inching their way toward the final rules and regulations.”

Manning McPhillips, governmental affairs advisor with Watkins & Eager in Jackson, said the U.S. Treasury Department and the IRS about a month ago issued the rules and regulations for the Opportunity Zone investments.

“They made the rules of the road more clear,” McPhillips said, “but there are still question marks out there.”

McPhillips said he has seen much interest in Opportunity Zones from investors and he expects to see people investing soon once final details are ironed out including timeframes for investing capital gains money into an Opportunity Zone. The longer the investment, McPhillips said, the more the benefits in capital gains tax breaks.

“It is going to be a good opportunity,” McPhillips said, “particularly for areas of Mississippi, driving capital into areas that need it. There needs to be a lot planning and forethought that goes into it before you make an investment.”

Benefits to be reaped

Natchez Mayor Darryl Grennell said Natchez has been excited about the prospects of being an Opportunity Zone ever since the tax law was enacted in 2017.

“It is definitely something the city of Natchez has been looking forward to,” Grennell said. “We’ve received the designation but a lot of things need to be spelled out.”

Once the details are set, Grennell said the benefits of being an Opportunity Zone would become clearer.

“I think it is great for the city to have the designation,” Grennell said, noting the Opportunity Zone designation was considered as the city recently worked on a downtown master plan.

Downtown business owners, who are already invested in the area, could see incentives, as well, Russ said.

“The Eola, would be prime candidate for spending those (capital gains tax) funds and making those investments,” Russ said. “All of those funds they are investing there could be available for Opportunity Zone (incentives).”

Grennell noted the prospects of the Opportunity Zone could make entrepreneurs more interested in investing in establishing a restaurant in the old depot building on the bluff, for which the city is seeking a tenant.

Chesney Doyle of FOR Natchez, the nonprofit group that headed up the Natchez Downtown Master Plan process said the Opportunity Zone designation is basically a tax shelter for up to 10 years for investors.

The downtown Opportunity Zone is even larger than the area included in the downtown master plan, Doyle said, and includes the Forks of the Road and the Margaret Martin building.

“If anyone had interest in the arts district (along Broadway), or to take on the Ritz and another property over there, they could incorporate a project and solicit investors who needed a tax shelter,” Doyle said.

Vidalia Opportunity Zone

Vidalia Mayor Buz Craft said he is excited that the town’s industrial park is now designated as an Opportunity Zone.

“We feel like there is going to be a big opportunity here for Vidalia and the region,” Craft said. “The incentive to put money here in Vidalia, that is a good thing.”

The incentives, Craft said, would just be another drawing card for the area.

“It is big,” Craft said. “We are trending upward with manufacturing, living a wonderful quality of life. I believe we have good people here. We have the amenities and quality of life to get the people here and the safety here with the services we offer as municipality. We’re here and open for business.”

Russ said the Opportunity Zone incentives would be another tool in the economic development tool chest.

“It will still be a competitive business,” Russ said, “but it will be a whole new area for reaching out to investors and different from before.

“Still, the principles of economics will apply. It is not going to solely be the reason somebody invests. It is going to make a decent deal better. It’s not the silver bullet, but it is something that is another tool in the toolbox to improve and market areas we’ve talked about.

“It’s something else, we are able to say, ‘If you’re interested in Opportunity Zones, this area is available.’”