UPDATE Monday, August 12, 2019, 11:47 a.m.: New York State senator James Sanders Jr. is laying groundwork in New York to modify the federal Opportunity Zone program.
“This program will either be a boom or a bust to the community. You’ll either come in as pirates or partners. And my job is to see if we can’t create a partnership,” he said to an audience of real estate developers and investors gathered at the Marriott Hotel in Brooklyn Friday to attend the Opportunity Zone Expo, an event dedicated to the program.
The OZ program aims to boost investment in designated low-income areas across the country by allowing investors to defer taxes on capital gains they invest in a project inside a zone until 2026, and reduce that payment by up to 15 percent, so long as they hold the position for 10 years. Those same investors, who stay in the project for a decade, would also pay no taxes on profits from their investment.
While speaking at a session during the Expo last week, Sanders announced that the state is exploring the idea of setting up additional city and state “opportunity zones.” The new zones will piggyback off the national program and add even more incentives for investors, such as grants, payments in lieu of taxes and “marrying” federally-designated Opportunity Zone projects to other major projects already underway in New York. (All of these incentives would be on top of the tax benefits already baked into the OZ program.)
“We will make it more lucrative,” he said. “We can explore many different ways of going about this.” Sanders added that, as a former long-time City Council member, “I know what’s in the toolkit and now I know what’s in the state’s toolkit.”
Sanders said the New York program would also include provisions that take into account “what is lacking at the federal level.”
In order to access added sweeteners, investors would be required to sign community benefits agreements that will come with reporting requirements, timelines and clawback provisions if investors don’t adhere to the agreements, Sanders said.
Community benefits include job creation for local residents, involving minority and women-owned businesses and favoring structures where community residents and businesses wind up owning a given project, according to the senator.
“If you’re not doing these things, this is the people’s money [and] the people’s money should be returned to the people,” he said.
Sanders will be meeting with officials from Mayor Bill de Blasio’s administration in the near future to discuss his plan for city and state Opportunity Zones.
“If left to its own devices, the [OZ program] is going to go the way of many different things,” he said. “It can get off the rails quickly and lead to massive gentrification. So, instead of that, what we want is to make sure that we nudge people in a better way.”
The program has also drawn criticism after officials in Baltimore and Chicago expanded initially-designated zones to include major projects in areas that were not originally classified as low-income. A similar situation also occurred in Puerto Rico.
Sanders comments stood in contrast to the event’s keynote speech delivered hours before at the event by Secretary of the Department of Housing and Urban Development Ben Carson.
“Some people have complained, and said, ‘This is just a mechanism for rich people to get richer,’” said Carson, whose department partly oversees the federal OZ program. “Um, news flash, rich people are going to get richer anyway.”
Editor’s Note: The story was updated after the Mayor’s office provided a statement.