Tax credits for economic development in Tucson Opportunity Zones can put commercial construction into overdrive.
Tucson commercial real estate development can go into overdrive in the next few years, thanks to a federal tax credit for long-term investors that’s aimed at bringing money into low-income communities.
Twenty-seven census tracts in Pima County have been approved as Opportunity Zones. They allow investors to reduce the amount of their reinvested taxable capital gains by 10% or 15%, depending on the length of the investment.
Investors would put capital gains money into Opportunity Funds in order to qualify for the tax credit. These funds must be organized as a corporation or partnership and approved by the federal government.
Opportunity Fund monies are used as equity investments in businesses, real estate and business assets within Opportunity Zones.
Tucson Opportunity Zones
Most of the Tucson-area Opportunity Zones, which are so designated for 10 years, straddle Interstates 10 and 19 from the southern to northern ends of the city of Tucson.
These planned-development areas have large parcels of land for office, retail and industrial uses. Pima County and other economic development officials strategically planned on getting these big job-generating projects named as Tucson Opportunity Zones.
“Pima County and the city of Tucson…worked closely together to coordinate their applications to maximize the chance of approval and ensure the greatest economic impact for the region,” according to information on the Pima County website.
Other Tucson Opportunity Zones include
- most of South Tucson
- west of the University of Arizona
- south of Grant Boulevard between Silverbell Road and Sixth Avenue
- the Pascua Yaqui reservation and the San Xavier District of the Tohono O’odham nation
- southeast of I-10 and Ina Road
- Grant Road corridor between Tucson Boulevard and Swan Road
- south of the Tanque Verde and Grant roads intersection
- southeast of Kolb Road and 22nd Street
- south of Kino Sports Complex.
“The targeted census tracts are areas that have excellent available workforce that will directly benefit from investment and improved availability of higher paying jobs,” says the Pima County website, “so this program is a win for the community, our workforce and those who invest to make us better.”
Fight against Poverty
The 2017 Tax Cuts and Jobs Act included the Opportunity Zone program as a way to boost private investment in low-income areas.
Each state was allowed to nominate census tracts that met criteria that include a low-income population. Arizona Gov. Doug Ducey solicited nominations from every county.
John Lettieri is the co-founder and president of the research and advocacy organization Economic Innovation Group that helped design the program. He has told U.S. lawmakers that the program has “the potential to drive billions of dollars in new private investment to struggling communities over the coming decade.
“The unique structure—and equity focus—of this incentive has the potential to unlock an entirely new category of investors and create an important new asset class of investments.”
This is particularly important for Tucson and the rest of Arizona, both of which struggle to find major business investors, including venture capital for the growing segment of technology startups.
The federal government still needs to issue guidelines for forming Opportunity Funds. And there are no guarantees of how much, if any, money will flow to Tucson Opportunity Zones.
What I and other economic development advocates like about the program is that it is another incentive to draw site selectors to Tucson as they search for areas to build new operations, relocations and expansions.
This can only enhance the types of state, regional and local incentives that have recently made Tucson home to a new Amazon fulfillment center, an expanded GEICO regional corporate office, the expansion of Raytheon and the World View headquarters.
For updates on Tucson Opportunity Zones, contact Commercial Real Estate Group of Tucson, 520-299-3400.
More information: “Pima, Tucson application for Opportunity Zones accepted”