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SALT LAKE CITY — Thanks to a little-known section in the $1.5 trillion federal tax cut signed into law last year, states across the nation have a new tool to incentivize growth in underdeveloped poverty-stricken areas — and Utah is gearing up to take advantage of it.
Of the 181 rural and urban areas in Utah that are eligible for the program — of which the governor can only nominate up to 46 — Salt Lake City's northwest quadrant has a good chance to make the cut as an area that has long awaited development and is slated for an inland port, state officials say.
The new tax law creates the Opportunity Zones program, which instructs governors in each state to designate areas as "opportunity zones" from a pool of low-income census tracts, which would then be eligible to use new tax incentives to attract long-term development in poor areas that lack infrastructure and jobs.
"This is an exciting program; it holds a lot of potential," said Andrew Gruber, executive director of the Wasatch Front Regional Council, a member of the state's Association of Governments that will be issuing recommendations to the governor's office.
"Opportunity Zones are a chance to incentivize the private sector to make investments in local communities that may be struggling," Gruber said. "We've seen housing affordability is a really significant challenge in Utah — this could help with that. We've seen infrastructure that needs reinvestment — this could help with that."
How does the program work? The Opportunity Zones would be attractive to businesses because the program provides tax incentives for investors to re-invest their unrealized capital gains into "opportunity funds," according to the U.S. Department of Treasury.
The program offers investors three incentives, according to the Economic Innovation Group:
- A temporary deferral of capital gains taxes until 2026, by allowing investors to put and keep unrealized gains in an opportunity fund.
- A 10 percent reduction of how much an investor has to pay on deferred taxes on capital gains if the fund is held for five years and another 5 percent reduction if held for seven years.
- A tax exemption on any capital gains on investments made through the opportunity fund as long as the investor holds them for at least 10 years.
Herbert has until April 20 to submit nominations to the federal government. Leading up to that deadline, the state has asked Utah's seven associations of governments to collect information from counties and cities to help inform his decision, said Ginger Chinn, managing director of urban and rural business services at the Governor's Office of Economic Development.
"This (program) could equate to trillions of dollars of investment for the nation," Chinn said. "Now what that means to Utah, we don't know. But what we are really excited about is we have taken a bottom-up approach on this, going to cities and counties for (recommendations)."
Chinn said it's not yet clear how much money the program could mean for Utah since its such a new program and the U.S. treasurer hasn't yet released more information on how to set up the opportunity funds. But the Economic Innovation Group, a bipartisan public policy organization focused on economic issues, estimates the potential capital eligible for reinvestment in Opportunity Zones is more than $6 trillion.
"It really could be the tipping point for investing in (low-income) areas," said Salt Lake County Mayor Ben McAdams.
On Friday, Salt Lake County received its first list of recommendations from cities, minus Murray and Sandy, which opted not to submit any areas. McAdams said he intends to review the list and forward recommendations to the Wasatch Front Regional Council by Monday.
On Tuesday, Salt Lake County is also holding a public meeting from 5:30 p.m. to 7 p.m. at the Salt Lake County Government Center, 2001 S. State, to take public input on recommendations.
The list of city recommendations, which Salt Lake County compiled and provided to KSL, includes areas in Kearns, Magna, Midvale, Millcreek, South Salt Lake, Taylorsville, West Jordan, West Valley and Salt Lake City.
While other cities and townships submitted between one to four areas each, Salt Lake City submitted 10 areas with seven alternatives — most of which lie on the city's west side, including the northwest quadrant.
"We think the west side has great opportunity," said Lara Fritts, Salt Lake City's economic development director, adding the area could benefit from an infusion of cash that could revitalize neighborhoods and attract even more investment.
We've seen housing affordability is a really significant challenge in Utah — this could help with that.
–Andrew Gruber, Wasatch Front Regional Council
Fritts said Salt Lake City also included the northwest quadrant because of already high interest for investment, since Salt Lake City has heard from a number of companies including Amazon and Stadler Rail that have committed to investment. It also comes at a time with high state interest to develop a global trade area or inland port.
"Being able to build upon that success we felt was important," Fritts said.
McAdams previously told KSL that Salt Lake City's northwest quadrant has the potential to be "on the top of the list" of areas considered to be Opportunity Zones.
In an interview on Thursday, McAdams, not wanting to step ahead of the process, was reluctant to specifically state that the county will be recommending the area in its list to the Wasatch Front Regional Council, but he did say the northwest quadrant "is a place where all stakeholders are looking at the possible job creation and investment."
"So we think that it looks like it could be a prime candidate," McAdams said.
Chinn said it's too soon to say whether the governor and his team will select the northwest quadrant as one of the opportunity zones, but "we're definitely not ruling it out." Noting it's size and already high-profile desire for development, Chinn added: "My guess it will be a priority."