MANSFIELD – When opportunity recently came knocking, Richland County leaders answered, and now Mansfield may reap the rewards.
Governor John Kasich included three Mansfield-based census tracts in the 320 tracts he recommended Wednesday to the U.S. Treasury for designation as “opportunity zones.”
Census tracts in nearby Crawford and Knox County also made the cut. In Crawford, three tracts were designated, two including portions of Bucyrus and one on the Eastern portion of the county, north of Galion and including parts of Crestline. One tract in Knox County includes the north end of Mount Vernon. None were nominated in Ashland.
View all the nominations at development.ohio.gov.
Congress established the Opportunity Zones program through the 2017 Tax Cuts and Jobs Act, which encourages investors to reinvest their unrealized capital gains into “distressed communities” designated as “opportunity zones” in exchange for a series of tax incentives.
“We’re pretty excited about this. We had 13 eligible tracts, and three of them got through, so we’re pretty close to the 25 percent," said Richland Community Development Group economic director, Barrett Thomas. "Richland County got its fair share which is always exciting to see.”
After learning about the program in mid-February, he arranged for key people and organizations in Richland County to meet. Despite short notice, the group submitted all 13 eligible census tracts for a chance to be designated.
“I think this really provides an opportunity -- no pun intended -- to push a few things forward in the community," said Richland Area Chamber of Commerce president Jodie Perry. "There’s a lot happening already and this adds tools to the toolbox for how we can further develop things in our central business district.”
The designated tracts
Richland County leaders entered every eligible tract -- 11 in Mansfield and two in Shelby -- but the ones chosen were Mansfield specific.
There’s tract 31, which includes the downtown, and nearby tracts 5 and 6.
“I think these opportunity zones represent great potential for investors and will help us tackle development projects,” said Jennifer Kime, CEO of Downtown Mansfield, Inc.
Thomas specifically mentioned plenty of commercial real estate potential in tract 31. Previously he stated the “best” distressed communities might be the ones named as opportunity zones. He emphasized ongoing efforts when submitting census tracts in an effort to prove opportunity exists, that people have already invested their time and money to better these places.
“Tract 5 is the hospital. I guarantee the investment that Ohio Health has made in that census tract probably single-handedly pushed that over the threshold,” Thomas said.
Tract 6 includes the former Simpson School property.
How they were chosen
Ohio had 1,280 eligible tracts. Of those, 890 were proposed for consideration from 73 counties via 238 online submissions and letters of support, but only 320, or 25 percent, of the eligible tracts could be submitted to the U.S. Treasury for designation as opportunity zones.
The governor submitted the state’s full allocation with tracts from each of the 71 counties that suggested tracts. Any county that submitted less than 25 percent of its eligible tracts received a recommendation.
Other counties that submitted more, which was overwhelming the case, also received immediate approval for 25 percent of the tracts. The others were assigned as “maybe” and included in the recommendation based on a tract’s description, local cooperation, how submitters prioritized the tracts in their proposals and how many people submitted a tract.
Places with job creation potential, history and future commitments of public and private investment, available land for development and existing businesses and employers within the region were prioritized. More local cooperation and submissions were also viewed positively.
What happens next
If the U.S. Treasury approves the governor’s choices, Mansfield’s three tracts and the 317 others in Ohio will be designated as opportunity zones, meaning investors will receive tax incentives to support projects, called “Qualified Opportunity Zone Properties,” in that tract.
Institutions and individuals will receive tax deferments by putting money from capital gains, money earned when a stock appreciates, in a Qualified Opportunity Fund, which invests in stock, partnership interest and business properties within an Opportunity Zone.
If investors put their capital gain dollars in the Qualified Opportunity Fund, they don’t immediately have to pay their capital gains taxes, which is currently at 20 percent. If they leave that money there for five years, they will receive a 10-percent discount on those taxes.
After seven years, it’s a 15-percent discount. At this point, whether they leave the money sit awhile longer or not, investors must pay the tax.
“Later is always nice for investors,” Thomas said in a previous interview. “At the end of seven years, you do have to pay the tax because you do owe it, but you get a discount and you got to wait for seven years.”
But, there’s further incentive to leave that money alone for a while longer. After 10 years, whatever money they’ve earned inside the Qualified Opportunity Fund can be taken out tax free. If removed earlier, the individual must pay tax on any money made.
“The idea is to get a bunch of people to drop some cash into these funds and leave it there for 10 years. The fund is going to invest in those distressed zip codes that they’ve identified and leave the money there for 10 years to try to make a difference,” Thomas said.
Beyond this, the process is relatively undefined.
“The work has really just begun for us,” Kime said. “You’re not going to see this tomorrow, but it’s a real opportunity for our future.”