There are chances to lure development to some long-ignored areas of Baltimore and other parts of the state that have newly created Opportunity Zones, but the money won’t automatically flow, a panel of experts told a crowd of businesspeople Monday.
Opportunity Zones were created under the massive federal tax law signed in 2017 and are designed to direct investment capital into struggling communities. They allow investors to defer or avoid taxes on capital gain if they put the profits into a fund and invest.
“It’s great that this was passed into law, but it’s execution that matters,” said Jimmy Kemp, president of the Jack Kemp Foundation, which supports the zones and hosted a forum in Baltimore to discuss the finer points.
More than 200 businesspeople from around the region turned out at City Garage in Port Covington to hear Kemp and John Lettieri, president and CEO of the Economic Innovation Group, a Washington think tank that has pushed for the tax break. Also speaking were Lt. Gov. Boyd Rutherford, Baltimore Mayor Catherine Pugh, state and city economic development officials and investors and developers, including those related to Port Covington in South Baltimore, one of 149 zones in Maryland.
The panel mentioned several hurdles. The federal regulations to implement the complex law are not yet complete, so details about what the government will allow isn’t totally known. Investors are likely to be from out of town town, so they will need helping identifying local projects and understanding the communities. Those communities will have to understand the limits of what investors will help build and support what does come. And local governments will need to understand the how it all works so they can act as conduits for the projects.
Ben Siegel, Baltimore’s Opportunity Zone coordinator, noted that there already has been a major investment using the preferred tax treatment — the insurance and investment management firm Prudential Financial plans to invest in a $150 million East Baltimore mixed-use project called Yard 56, which is across Eastern Avenue from Johns Hopkins Bayview Medical Center. The firm didn’t disclose how much it would invest in the project, which will include offices and shops in its $77 million first phase.
He said his office is working on making more connections between investors and the city’s other 41 Opportunity Zones.
Rutherford said the state has already pitched adding state incentives onto the federal breaks to grab attention and dollars for Maryland’s struggling communities, which extend to rural areas from Baltimore City. Every county has at least one Opportunity Zone. The state incentives would include job training and other tax breaks for job creation, for example.
“Many have had projects on the books for a long time,” Rutherford said of localities. “This may be the catalyst.”
Kenneth Holt, state secretary of Maryland Department of Housing and Community Development, said the state was working on a database of all the possible projects in all the zones so it can match them with private sector money.
But investors are awaiting those regulations to go with the tax law, said Michael Novogradac, managing partner at Novogradac & Company, which provides consulting and accounting services to real estate firms and other companies.
Once they are announced, he said, there “is a huge appetite” for investment in Opportunity Zones.