Under a plan the governor announced Thursday, the state would create a series of initiatives to attract investment to the zones. Hogan’s plan involves offering businesses additional state tax credits, job training programs, small business loans and affordable housing incentives, in some cases through proposed legislation.
“Providing federal capital gains tax incentives is a great start, but it may not be enough to ensure the revitalization of many of these neighborhoods and communities,” Hogan said from a development site in an opportunity zone along North Avenue in West Baltimore. “So we plan to do everything in our power to utilize new and existing state and federal programs, grants and funding sources, and to have all of our state agencies work collaboratively with our county and municipal governments and the private sector to supercharge our opportunity zone revitalization. Our plan is to make Maryland’s 149 opportunity zones the most competitive ones in America.”
Maryland’s 149 zones were selected by local and state officials and approved by the U.S. Treasury Department in April as part of an incentive tucked into federal tax reform in December 2017. Investors in the zones, located in or adjacent to impoverished census tracts, can defer and even avoid capital gains taxes if they hold their investments long enough.
Hogan said the proposed state initiatives “will foster an environment of economic opportunity, create thousands of new jobs, revitalize and literally transform communities and neighborhoods all across Maryland that need our help the most.”
Opportunity zones, distressed areas in Maryland and across the U.S. where investors can get tax breaks, aim to match record amounts of capital with overlooked communities. While the federal tax reform incentive has broad support, some worry it's a tax give away that will leave poor areas behind.
The governor announced the initiatives on the construction site of Walbrook Mill in West Baltimore, a five-acre abandoned lumber yard near Coppin State University that’s being redeveloped in a $29 million project into 140 affordable and market-rate apartments and townhouses along with shops and commercial, warehouse and industrial space.
The project is part of Hogan’s Project C.O.R.E., or Creating Opportunities for Renewal and Enterprise, a multiyear city-state partnership to demolish vacant and derelict buildings in Baltimore and replace them with green space or redevelopment.
“The project could definitely benefit from being located in an opportunity zone, and the governor’s announcement today will make that even more likely,” said James Riggs, a vice president of Annapolis-based developer Osprey Property Co.
New tax credits, offered to businesses that create jobs, could help attract tenants to a food hall that’s planned within an apartment building along North Avenue. And it will make it easier to find a partner to re-develop existing vacant buildings for a workforce development program, Riggs said.
“It opens up a lot of doors to us to find potential investors and other partners who would be able to utilize the existing space,” he said. “The community is in need of a lot of attention but could use training for people to rejoin the workforce.”
When the site was a lumber yard, it was “an important center for employment and commerce in the neighborhood, and we’re hoping to return as much of that to the neighborhood as we can,” Riggs said.
Hogan said he is creating a task force by executive order, chaired by Lt. Gov. Boyd K. Rutherford, that will hold regional summits throughout the state where stakeholders can discuss options for development within opportunity zones. The task force will develop a State Opportunity Plan to align goals with the state’s economic and cultural priorities. The task force will work with local governments to help fast-track development.
Nearly 30 percent of the state’s opportunity zones — 42 — are in Baltimore, where the program is expected to help ongoing efforts to reduce the number of vacant houses and boost employment, said Mayor Catherine Pugh. The zones are spread throughout the city and include some areas already slated for redevelopment, including Poppleton, Port Covington and Perkins Homes. A zone in Park Heights includes Pimlico Race Course, which city and state officials want to see redeveloped to keep the Preakness.
Pugh called the new state initiatives an “infusion of capital that will make a difference in how we continue to move forward on opportunity zones. … We want to drive investment into the opportunity zones across the city, and we look forward to the revitalization of these long under-invested communities.”
Hogan’s administration plans to introduce the “More Opportunities for Marylanders Act of 2019,” which would extend a 10-year tax credit for each new job created by a company that locates or expands in an opportunity zone in Maryland. These companies would be eligible for an additional $6 million in tax credits, have 100 percent of their state property taxes exempted, and have all business recording, filing or special fees waived.
The state’s EARN workforce development grant program also will focus directly on the state’s 149 zones, with a new $3 million investment to establish a job training program, “Opportunity Works,” for businesses that locate in the zones. The state’s Department of Labor plans to issue competitive grants for qualified businesses to provide training programs that give participants a credential or identifiable skill.
The governor also is proposing legislation to invest $16 million in a new Maryland Technology Infrastructure Fund, housed with the state’s Technology Development Corp., or TEDCO, to help create a long-term strategic vision to leverage more than $500 million in anticipated private sector investment over the next decade.
Other funding sources will be available through the state Department of Housing and Community Development. including $20 million for Rental Housing Works, to build and renovate affordable housing, $8 million for small business loans through the Neighborhood Business Works program, and $3.5 million for the statewide Strategic Demolition Fund for site acquisition and demolition of derelict buildings and redevelopment.
Hogan also said he is launching a website, the Maryland Opportunity Zone Information Exchange, to help attract capital to projects and businesses. The online exchange will serve as a virtual meeting place for investors, fund managers, property developers, new or expanding businesses, and local stakeholders, and will be open to the public.
State Senator Bill Ferguson, a Baltimore Democrat, said he welcomed the announcement and was glad to see a task force set up to establish goals.
“I’ve been worried that opportunity zones would just be about investment returns and not about community development, and this provides a pathway to ensure that investment is about more than returns,” Ferguson said. “It’s also about developing communities.”