A new survey ranks the Garden State ripe — and tops in the nation — for potential development in so-called Opportunity Zones created under the Tax Cuts and Jobs Act of 2017. America has nearly 8,000 zones deemed low-income and economically distressed that offer tax breaks to those who invest and build there and create jobs. New Jersey has 169 Opportunity Zones spread out over 75 cities.
“I think it creates an incentive for investors and developers to come in to neighborhoods and communities that they normally would view as a risk. But the census tracts that are identified in the 169 zones in New Jersey create an opportunity for communities that need development to get development,” said Lt. Gov. Sheila Oliver.
Census tract 81 in Essex County is better known as Newark’s Lincoln Park where the poverty rate is higher than 40 percent, the unemployment rate tops 17 percent and the homeownership rate is less than 1 percent.
Newark has 13 opportunity zones and the survey ranks it among the most walkable and socially and economically inclusive. But is the tax incentive program that started last April enticing investors?
“We’ve seen a raised interest and increasing with respect to environmental Opportunity Zones where we have brownfields and industrial sites that need to be converted. That’s a really powerful mechanism for that,” said Carmelo Garcia, Newark chief of development.
The program allows investors to defer paying federal taxes on their profits when they reinvest them in low-income communities, and even no taxes on them if they keep those profits in a specific fund for at least 10 years.
Sen. Cory Booker co-wrote the bill to create Opportunity Zones.
“I hope that it produces billions of dollars of investment in places that people were ignoring and thousands and thousands of jobs to communities that need it,” Booker said.
Critics have taken aim at the program. The Brookings Institution says loopholes have allowed nearly a fifth of the zones to go in wealthier areas. Others have questioned their locations and what sits in them, even though they tend to have rates of poverty and unemployment two and three times the national averages.
An example is the Trump National Golf Club in Pine Hill. It doesn’t qualify for the tax breaks, but new development on it would qualify. Aware of the criticism, the state argues the area away from the golf club is “highly distressed.”
Kushner Companies — with ties to the president’s son-in-law and adviser — is growing its $13 million portfolio with two beachfront properties in Long Branch.
“I’m deeply skeptical about the policy mainly because I’m worried that it’s targeting areas with these tax incentives which are already attracting a lot of investment,” said Timothy Weaver, assistant professor of political science at SUNY Albany.
Weaver has written about the hope and promise of such zones. He says the new program could eliminate taxes on profits for the real estate industry.
“It doesn’t really need any extra help, and to think that by helping the real estate industry you’re helping poor people in poor neighborhoods is really pie in the sky,” he said.
Weaver agrees with Booker that the program needs more oversight, more reporting requirements than the law allows.
“That was one of the things we’ve been fighting for. We want them deeper so that we can measure results,” Booker said.
Weaver describes the performance of other programs with the same intent.
“They didn’t have the desired effect, or at least the stated effect, of helping poorer people in those neighborhoods become less poor or more employed. Instead, it’s businesses that benefit upfront and there’s very little trickle-down effect at all,” Weaver said.
“As long as local leaders really at the helm of planning for that investment and it can be done in a way that really benefits the community, this is going to be one of the most successful economic development pieces of legislation in my lifetime,” Booker said.
The Murphy administration has rolled out its Opportunity Zone navigator to help investors find property. It says investors and developers have approached more than half of the cities with Opportunity Zones, describing it as “strong project demand.”