TheBurg

12 | theburgnews.com | 01.20 O pportunity Zones. Heralded by some as the "second coming" for economic development. Derided by others as a cozy tax shelter for the uber-wealthy. In any case, opportunity zones were supposed to drive investment into poorer and underdevelopment areas. So, how is the darling of President Trump's 2017 tax reform working out locally? In 2018, six of Harrisburg's census tracts—about half of the city—were dubbed "qualified opportunity zones." ese zones cover much of downtown and Allison Hill, as well as part of Midtown and Uptown. Almost two years later, no known projects have surfaced in the city. But, say developers, stay tuned. Something still might be brewing. oPPortunItY Zones 101 Opportunity zones start with capital gains, the profits made on the sale of such assets as stock and real estate. Investors who put a portion of those gains into specially created "Qualified Opportunity Funds," used to invest in economic development projects, can defer taxes until that investment is sold, or until Dec. 31, 2026. Investors who hold that investment beyond 2026 pay no taxes on those gains. So, just what is an "Opportunity Zone?" Governors designated opportunity zones in their states. In each lanD oF oppoRtunity? Nearly two years ago, much of Harrisburg was dubbed an "opportunity zone." Has anything developed? bY m. DIAne mccormIcK tract, the poverty rate had to be at least 20 percent, median family income could not exceed 80 percent of the state or metro area median, whichever was higher. Among Pennsylvania's 300 Qualified Opportunity Zones approved by the U.S. Treasury Department, six are in Harrisburg, with one creeping into Susquehanna Township. As eBurg reported in 2018, they encompass downtown south of Forster Street, South Harrisburg, South and Central Allison Hill and neighborhoods along the Cameron Street industrial corridor. e American public, in a sense paying for QOZs through the lost tax revenue, gets few glimpses into qualifying projects. Recipients of the benefit are not required to register, so the Pennsylvania Department of Community and Economic Development had no information on projects underway. e Harrisburg Regional Chamber & CREDC doesn't know if any existing projects in Harrisburg are allied with QOZ funding, said Director of Regional Workforce Partnerships Shaun Donovan, but "we do know people are looking for projects. at's always a positive." Some potential investors with national ties have queried about potential sites for warehouses, which "weren't fits" for the Harrisburg neighborhoods designated as QOZs, Donovan said. Opportunity zone criteria land right in the wheelhouse of Harristown, the developer of residential and office projects in downtown Harrisburg. QOZ status could make a project "a slightly more attractive investment for outside investors," said President and CEO Brad Jones. "It's another source, perhaps a catalyst of getting a project started," said Jones. "It's also creating a little bit of a sense of urgency." Harristown is "in discussions with some folks on one of the projects we're working on" to fold in QOZ funding, Jones said. But "the details are tricky," he said, especially because the IRS rolled out its rules slowly, in varied versions. Jones hopes the project can be sealed in the first quarter of 2020. Smaller markets such as Harrisburg may struggle to make projects "pencil out"—a developer phrase for the math that shows a profitable bottom line. It is, said Jones, "obviously going to be harder to make the numbers work because the values of the real estate aren't as high here as they would be in a tier- one city." "Our projects won't value out as high, rental won't be as high, but the cost of construction is still the same," he said. "It makes the projects more difficult to do, but we sort of specialize in these kinds of difficult projects." 6th Street Opportunity Zone Area

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