Erie Downtown Development Corporation presents Opportunity Zones in D.C.
WASHINGTON, D.C. - The Erie Downtown Development Corporation was among the first organizations in the country to utilize Opportunity Zones earlier this year.
That swift action is why Chief Executive Officer John Persinger and Vice President of Finance & Development Matt Wachter were invited to Washington, D.C. Tuesday, where they briefed lawmakers on their progress and explained how the legislation is working.
“We are now getting interest from national investors and organizations throughout the country that have never looked at Erie in the past,” said Wachter, who worked previously as a transactional tax attorney at MacDonald, Illig, Jones & Britton law firm in Erie.
“What makes this so different is this is going to be an injection of private capital,” said Persinger, a former Erie mayoral candidate who also previously worked at MacDonald Illig. “These are private dollars coming into Erie. This is something we haven’t seen in decades.”
The duo met with Pennsylvania’s U.S. Senators Pat Toomey and Bob Casey, Jr. along with key lawmakers behind the Opportunity Zones legislation, U.S. Sen. Cory Booker (D-N.J.) and Tim Scott (R-S.C.).
The early success is crucial. There are 8,700 Opportunity Zones in designated U.S. Census tracts across the country, meaning it’s likely not all of them will receive the necessary private investment to make them thrive.
Those zones are meant to encourage long-term development in low-income, high-poverty areas, and sort of work like this: investors pick the places and projects where they want to spend their money, and in return they get to defer their capital gains taxes through 2026, with certain strings attached.
Pennsylvania Gov. Tom Wolf designated eight Opportunity Zones in the City of Erie with several in the E.D.D.C.’s corridor.
“The goal being that we can boost up the tax base for our school district, our city and our county,” said Wachter.
The E.D.D.C. has already purchased eight properties across Erie’s North Park Row with their own funds. Outside funding through the Opportunity Zone legislation isn’t scheduled to begin until Jan. 2019, pending final IRS guidelines.
While Opportunity Zones heavily rely on private funding, groups like the E.D.D.C. are getting a boost in federal funding after President Trump signed an executive order last week.
“What we can do at the federal government level is we can create tax incentives that incentivize a person to take a risk that they may not otherwise take,” said Toomey, who served on the Senate Finance Committee that included the Opportunity Zones legislation into the 2017 Tax Cuts & Jobs Act.
The concept of Opportunity Zones originally came from the D.C. public policy think-tank, Economic Innovation Group, which invited the E.D.D.C. to present their information in Washington. EIG is led by Napster Founder and former Facebook President Sean Parker.
Critics call Opportunity Zones a tax break for the one-percent because it allows for deferred capital gains tax payments for wealthy investors while, in some cases, capital gains made through Opportunity Zone investments grow tax-free, according to Forbes.
But the E.D.D.C. is hoping the small carve-out in the 2017 tax reform package could bring big rewards to the city of Erie.
“We’re hoping to make more connections to really market the downtown core and make these Opportunity Zones a benefit for downtown Erie,” said Persinger, who hinted that an announcement on formal Opportunity Zone investments could come in early 2019 once IRS guidelines are completed.