Opportunity zones can be profitable investments, but during an NJBIZ panel discussion held June 11 at The Palace at Somerset Park experts said the process must be handled carefully.
Created by the 2017 federal tax law, the Opportunity Zone program is designed to spur economic development by providing preferential tax treatment for investments in certain areas. The federal government has approved zones in 75 municipalities and 169 census tracts in New Jersey. U.S. Sen. Cory Booker was a sponsor of legislation creating the zones, several of which are in Newark.
“We are dealing with an act now that I have not seen in 36 years,” said Mark Nicastro, certified public accountant and a partner at Friedman LLP. “This law is the worst written law,” he added. “Anyone who is considering going into an opportunity fund will need a set of advisors.”
Eduardo Rodriguez, the director of planning and community development for the City of Elizabeth, oversees planning and zoning.
“After this law passed, our first point was identifying the first tracks that are feasible for development for these projects,” Rodriguez said.
Stephen D. Jones, government relations regional manager at the International Code Council Inc., used to serve on local planning boards. He said that opportunity zones are new for local governments and municipal employees did not receive training.
“You may be faced with resistance because you are dealing with municipal governments who do not know what it means,” Jones said.
Jones sees the opportunity zone as a tool to revitalize blighted areas.
“The issue is getting the right people in the right seats to move your project forward,” Jones said. “There is a long process to upgrade master plans,” Jones said. “You may take years before you put a shovel in the ground.”
We are dealing with an act now that I have not seen in 36 years. This law is the worst written law. Anyone who is considering going into an opportunity fund will need a set of advisors.
– Mark Nicastro, partner at Friedman LLP
“Some communities deal with technical review committees,” Jones said. “Technical review committees are your godsend,” Jones said.
For more information, he advised people to visit the New Jersey Department of Community Affairs website.
Steven Kamen, member and co-chair of the corporate practice group at law firm Sills Cummis & Gross, explained that leased properties can be used for opportunity zones.
“Landowners are selling land,” Kamen said. “Developers are looking to sponsor individual projects. I have met investment advisors who are working with clients. There is so much excitement because it comes from so many different angles.”
Landowners are selling land. Developers are looking to sponsor individual projects. I have met investment advisors who are working with clients. There is so much excitement because it comes from so many different angles.
– Steven Kamen, member and co-chair of the corporate practice group at law firm Sills Cummis & Gross
Kamen said every project should have a strong rationale. “You have to capitalize your product,” he explained. “Your challenge is making sure investors have access to capital. … Imagine you are a developer. How do I orchestrate that in a 10-year hold? … The emphasis is on timing, timing, and timing.”
The panel discussion was moderated by Tai Cooper, managing director of policy and advocacy at the New Jersey Economic Development Authority. She said the purpose of opportunity zones is to drive wealth into rural communities and poor communities.
“Opportunity zones have taken over my life for the last two and a half years,” Cooper said. “There are about 200 funding commitments. It does not mean that money is in the bank.”