Sacramento needs to expand its beneficial tax treatment of investments made in Opportunity Zones (OZs) beyond affordable housing and “green technology” projects only, allowing local communities to best determine and implement locally-driven and loclly-appropriate strategies to maximize the economic and community development impacts under the new program.
At this very moment, California legislators are considering Governor Newsom’s proposal to limit California’s (federally-conforming) OZ program tax benefits to just affordable housing and green technology projects. But what if a community has an opportunity to create jobs in digital media or bioscience and doesn’t have a viable green tech project option? Or what if local residents and leaders have another community-oriented project in mind?
As the economic development leadership organization for a county with 274 census tracts designated as Opportunity Zones, the LAEDC believes that a strategy focused on a local area’s strongest industries and community-supported projects that demonstrate the potential for positive economic and community development impact should determine the categories that are prioritized as project-candidates for beneficial tax treatment under California’s OZ program, not the ones that reflect the “top-down” policy inclinations of Sacramento.
For this reason, LAEDC has urged Governor Newsom and LA County’s delegation of state legislators to grant additional flexibility and more local control to communities by expanding the California OZ program’s [federally-conforming] tax treatment to projects beyond green tech and housing. Our letter to Governor Newsom can be found HERE.
The new OZ incentive, which is intended to subsidize growing businesses in low-income communities, provides federal capital gains tax relief for investments made in qualified projects within a demarcated opportunity zone census tract. The LAEDC believes the incentive has potential, so long as it is properly expanded in a way that reflects the economic strengths and/or community priorities of the specific local area.
Understandably, however, there are still some voices wondering about the potential for the incentive to deliver desired outcomes. The New York Times, for example, noted that wealthy investors are benefiting from the program and seemed to imply that’s a sign the program isn’t working, but as economist Jered Bernstein noted in his response, the Times didn’t offer any evidence that the outcomes weren’t positive for low-income communities. Indeed, it is just simply too early to quantify impact and assess future outcomes. If anything, the NYT piece illustrates that we need to make sure there is absolute transparency and objective benchmarks set to ensure that the program drives desirable results, which gets back to the need for more local autonomy for a community seeking investments in a project.
The LAEDC believes that the Opportunity Zone incentive can achieve positive outcomes for communities that badly want greater inflows of capital and investment; but that it should be the communities themselves that have the choice over the types of projects that best suit the local needs and aspirations of their residents and leaders. The LAEDC urges our elected leaders to consider that perspective. Take the opportunity to contact the Senate and Assembly Budget Committee chairs and vice chairs to voice / offer support for this position.
|Budget Committee Legislator||Legislator Email||Their Legislative Director||Legislative Director Email|
|Assemblymember Adrin Nazarian||[email protected]||Emellia Zamani||[email protected]|
|Assemblymember Al Muratsuchi||[email protected]||Bryan Singh||[email protected]|
|Assemblymember Autumn Burke||[email protected]||Zachary Leary||[email protected]|
|Assemblymember Blanca Rubio||[email protected]||Taylor Woolfork||[email protected]|
|Assemblymember Cristina Garcia||[email protected]||Mandi Strella||[email protected]|
|Assemblymember Patrick O’Donnell||Assemblymember.O’[email protected]||Arturo Salaices||[email protected]|
|Assemblymember Reginald Byron Jones-Sawyer||[email protected]||Alana Troutt||[email protected]|
|Assemblymember Richard Bloom||[email protected]||Nardos Girma||[email protected]|
|Senator Connie Leyva||[email protected]||Jessica Golly||[email protected]|
|Senator Holly Mitchell||[email protected]||Bridget Kolakosky||[email protected]|
|Senator Maria Elena Durazo||[email protected]||Daisy Luna||[email protected]|