The term “economic opportunity zone” might not be part of local lingo, but it’s one reason why developers have plans to build an apartment complex in downtown Janesville.
Officials say it’s a tool that encourages long-term investment in distressed neighborhoods that could use the help.
But the exact benefits to investors and developers—and some of the specific ways the program works—are still unclear to many.
The economic opportunity zone program was created via the massive tax reform bill passed in December 2017. Governors could nominate economically distressed census tracts for zone designations before getting approval from the U.S. Department of the Treasury.
Rock County received five such designations. Janesville has a downtown zone and two adjacent zones covering most of the south side. Portions extend into the towns of Rock and La Prairie.
Beloit’s downtown and an industrial area northwest of it are the county’s two remaining zones.
The Corner Block on Parker housing development, which was announced last month but has yet to be officially proposed, is the first—and so far only—new project to come to any of the county’s five zones, Beloit and Janesville officials say.
Janesville Economic Development Director Gale Price said the city is still trying to learn more about the program and how to apply it. But the overall idea involves promoting long-term investment where it’s needed by allowing developers to defer taxes on invested money.
The key qualifier for being “long term” is 10 years. Investors get more return the longer they hold on to properties because the growth is not subject to federal taxes, Price said.
As an example, an investment valued at $1 million after 10 years would subsequently pay taxes on that $1 million—even if the property value later doubled, Price said.
It’s good for people who are anticipating capital gains taxes because they can avoid those taxes by reinvesting, he said.
Slingshot Architecture Principal Dan Drendel, who is involved in the Corner Block on Parker project, said being in an economic opportunity zone also shows Janesville cares about revitalization. That makes it an attractive long-term option for investment, he said.
Another member of the project’s development team, Joy Hannemann of Lancaster Investments, wrote in an email to The Gazette that some program regulations have not yet been released. But she pointed to the tax deferral for developers as the main benefit.
Investing in a zone could spark “urban vibrancy,” which can help recruit and retain young, talented employees, Hannemann wrote.
Dan Cunningham, vice president of Forward Janesville, said the program could help the city “play with the big boys.” It also could lead to more outside investment.
“It feels real. There’s really things happening now as opposed to, ‘We should maybe do this thing,’” Cunningham said. “We’re starting to roll downhill.”
But Cunningham was still hazy on the final details, as were several other people contacted by The Gazette at the local and state levels. Five months after Rock County received its five zone designations, it’s still too early to determine their impact.
Price said figuring that out will be essential to promoting investment and job creation opportunities within the zones.
“I think everyone’s still trying to figure out what it’s really going to mean in the end. That’s been one of the struggles we’ve all had here,” Price said.
“When we’re talking to people, we got to be able to talk to them about how this can benefit them and what this means for them in the long term as we’re trying to promote development in the community.”