PORT ANGELES — A development incentive effort for low-income areas is being piloted by a singular collaboration of North Olympic Peninsula tribes, city governments and economic development groups.
It’s about to open its doors to investors who want to make money and do good in one fell swoop as soon as the IRS issues regulations governing the nationwide program, organizers said this week.
Those with capital gains ripe for spending will get a tax break by putting money into what’s been dubbed the Emerald Coast Opportunity Zone (ECOZ).
The bipartisan federal Investing in Opportunity Act, which includes the incentive, was added to the tax code as part of President Donald Trump’s Tax Cuts and Jobs Act of 2017.
The Clallam County Economic Development Corp., which is helping spearhead the effort, will discuss the program at an EDC meeting at 10:30 a.m. Thursday.
The get-together will be in a second-floor meeting room at the Lincoln Center in Port Angeles.
The public is invited to participate and make suggestions for projects that will address economically distressed areas in Clallam and Jefferson counties where basics of a healthy economy such as housing and jobs are in short supply, Clallam EDC Interim Director Julie Knott said.
Opportunity zones were created in more than 8,500 census tracts nationwide, mostly on single tracts, compared to the 11 tracts that constitute a single zone on the North Olympic Peninsula, organizers said.
In Clallam County, tracts are on the West End, the city of Port Angeles, and most of Sequim, but not Carlsborg and Joyce.
In Jefferson County, they are in the city of Port Townsend and the towns of Port Hadlock and Quilcene, but not Port Ludlow.
The stakeholders behind the effort are the Hoh, Jamestown S’Klallam, Lower Elwha, Makah and Quileute tribes; the cities of Port Angeles, Forks and Sequim; the Port of Port Angeles, EDC-Team Jefferson, and the Clallam EDC.
“We can be identifying projects right now,” Knott said.
“Definitely, a priority is housing.”
Knott and other ECOZ organizers are waiting for the U.S. Department of the Treasury to issue final regulations for the program.
“The waiting game now is the IRS regulations that could happen any day now,” Kyle Johnson, executive director of the Jamestown S’Klallam Tribe’s Economic Development Authority, said Wednesday.
He said the tribe will soon have a beta version of a website for hosting all Emerald Coast Opportunity Zone projects — including its own.
“I can’t imagine 2019 ending without the tribe having not having started some sort of significant housing development on the Peninsula.
“The Opportunity Zone represents the best chance for doing that type of thing.”
The ECOZ employs a capital gains tax break combined with a push to develop underserved communities.
To qualify for the Opportunity Zone designation, a census tract needed to have a poverty rate of at least 20 percent or a median family income up to 80 percent of the area median.
The zones offer a pathway for investors to reinvest unrealized capital gains by dedicating them to an Opportunity Zone opportunity fund — not to be confused with the Clallam County Opportunity Fund, which consists of sales taxes spent for infrastructure projects and which is managed by the county commissioners.
The funds are invested, through the Opportunity Fund — which does not have a cap — into a qualified Opportunity Fund business property, partnership interest or stock.
Investors can temporarily defer capital gains taxes until 2026 by rolling their gains directly into the ECOZ’s Opportunity Fund, according to Economic Innovation Group, a Washington, D.C.-based public policy group (eig.org).
Capital gains taxes are reduced by 10 percent if the investment is held in the fund for five years and cut another 5 percent if held seven years.
Investors receive a 10 percent capital gains tax deferral after five years, a 5 percent deferral after seven years that ends Dec. 31, 2026, and pay no taxes on gains from the investment after 10 years.
Gov. Jay Inslee approved the ECOZ earlier this year as one of 139 such zones in Washington state.
They were first designated in 18 states April 9, according to an IRS fact sheet (tinyurl.com/PDN-IRSAnswers).
Craig Nolte, regional manager for community development for the Federal Reserve Bank of San Francisco, has held six workshops on the opportunity zones in Alaska and Washington, including one in Port Angeles in August.
“This collaboration is unique because it has tribes working closely with cities,” Nolte said.
“I don’t know of another opportunity zone across the country where tribes are working with cities unless the city is working within the reservation.”
Some have criticized past development-oriented tax-incentive programs such as so-called enterprise and empowerment zones, as being ineffective (tinyurl.com/PDN-IncentiveCritic).
Forks City Attorney-Planner Rod Fleck said the empowerment-zones established in the 1990s, of which Forks was one, were ineffective because, unlike opportunity zones, they lacked the compelling incentive of opportunity zones.
“It was a tax incentive, but not a tax incentive with a difference,” he said.
Nolte said the program provides “a significant benefit” to individuals and companies who pair the tax break with other incentives, such as the low-income housing tax credits.
“I’m telling people in our workshops that there are enough investors out there right now to incentivize states and local jurisdictions to just go ahead and move forward assuming this is going to happen,” he said.
“If the Emerald Coast project waits and doesn’t do anything now, other areas will be ahead of them for investors.”
Senior Staff Writer Paul Gottlieb can be reached at 360-452-2345, ext. 55650, or at [email protected].
Terry Ward, publisher of the Peninsula Daily News, Sequim Gazette and Forks Forum, serves on the Clallam County Economic Development Corp. board of directors.