25 low-income census tracts in Delaware were designated as Federal “Opportunity Zones” last week. This means there are now federal tax incentives for investment in those areas.
The Opportunity Zones, nominated by Gov. John Carney earlier this month, are located in Claymont, Downtown Wilmington, along Route 9 in New Castle, at the STAR Campus in Newark, and in Smyrna, Dover, Milford, Georgetown and Seaford.
James DeChene, Senior Vice President of Government Affairs at Delaware’s Chamber of Commerce, sees the Opportunity Zone designations as promising.
“If you look at Georgetown, or areas in Dover or Smyrna, these are areas that could be up-and-coming, Smyrna in particular,” DeChene said. “They just need a little extra help to get them across the finish line there. And I think these kinds of programs are helpful in that they’re designed to do just that.”
DeChene is also hopeful that the federal designations will complement state efforts.
“The good thing about the opportunity zones, in part, is that there is some overlap with the Downtown Development Districts… that gives investors additional tax incentives to redevelop,” DeChene said.
Six of the nine contiguous Opportunity Zone areas do overlap with pre-existing Downtown Development Districts, but are much larger.
But national experts have said the jury is still out on whether these zones actually help low-income communities. Adam Looney of the Brookings Institution warns that because subsidies are based on “capital appreciation, not on employment or local services,” they run the risk of being “subsidies for gentrification.”
According to Albert Shields, policy director in the office of the Governor, specific guidance on how the Opportunity Zone program will work is still forthcoming from the U.S. Department of Treasury.
But according to the Economic Innovation Group, a bipartisan policy research organization which helped write and pass the legislation that authorizes Opportunity Zones in last year’s Tax Cuts and Jobs Act, the community investment will come through privately created, but government-designated, Opportunity Funds.
Investors in these funds will get breaks on capital gains taxes, with the biggest rewards on long-term investments.