Oct. 18–Allentown and the Lehigh Valley are poised to capitalize on a federal tax-incentive program that provides incentives for investment in distressed communities, a nationally known expert on development said Wednesday.
“I’ve noticed Allentown and the Lehigh Valley are very well-organized,” said Evan S. Weiss of PEL Analytics, a division of the policy think tank Pennsylvania Economy League, who was among several speakers Wednesday at a symposium on the federal government’s newly rolled-out “Qualified Opportunity Zone” program. “I think the level of interest and level of potential here is very unique to Pennsylvania and the nation.”
About 200 people — a cross-section of local government officials, developers, investors and others — attended the symposium.
The Tax Cuts and Jobs Act signed last year, known mostly for its significant tax breaks to corporations and high-income earners, also gave birth to the opportunity zones. Gov. Tom Wolf’s administration selected the zones in Pennsylvania, which follow the outlines of U.S. Census tracts in lower-income areas.
Five tracts in Allentown covering downtown and a portion of the city’s south side — particularly its industrial quarter that includes a former Mack Trucks manufacturing facility — are considered opportunity zones. The opportunity zones also cover parts of Bethlehem and Easton, as well as a tract following the Lehigh River through Glendon.
The law will forgive any capital gains taxes developers would owe on commercial or residential projects they create in the designated areas, provided they retain ownership for at least a decade. If investors hold the investment for 10 years, capital gains are tax-free, according to the Internal Revenue Service, which is working on completing the regulations
Speaking before the conference, Weiss said other tax-incentive programs, such as the Allentown Neighborhood Improvement Zone, the statewide Keystone Improvement Zone, and the region’s “relatively stable corporate and business community” have already benefited the Valley.
Weiss said the federal law’s intent was to reallocate federal dollars and spur investments throughout the country instead of concentrating it in hot real estate markets. Through previous legislation, a pattern had developed over the decades that drove 80 percent of new venture investment into New York, Massachusetts and California, he said.
Critics argue creating such opportunity zones could potentially displace residents and lead to a spike in housing prices. Weiss said he could not predict what would happen to the Lehigh Valley compared with places like as San Francisco, which has seen its real estate prices shoot up.
“The hope is that we’re kind of generating enough housing so that there is not going to be as much pressure to push people out,” he said, adding the opportunity zones have the potential to create new jobs for residents. “We talk about real estate, but the program was frankly designed for business investment,” he said.
Officials in the Lehigh Valley are enthused at the prospects of being able to dovetail local and state incentive programs with the Qualified Opportunity Zones.
“The uniqueness of Allentown is that we already have this robust development going on,” said J.B. Reilly, president of City Center Investment Corp., downtown Allentown’s largest developer.
Allentown’s downtown in particular has benefited from an arena and several new commercial buildings that are either open or under construction courtesy of the NIZ, which offers generous tax incentives to developers such as Reilly.
“It’s going to help the development outside of the NIZ,” said Darian Allen, a certified public accountant with RLB in Allentown.
But for Allentown, which continues to struggle with old or vacant properties, the stakes are high. Asked during the symposium if he had a clear vision for development, Leonard Lightner, the city’s community and economic development director, put it succinctly.
“It’s real simple,” Lightner said, “we want everything developed.”
City Center officials also gave a tour of several blocks along Hamilton Street to potential investors.
“To see this happening in the Lehigh Valley, where Philadelphia is such a known city, and now you’re seeing it up here, I think it’s really exciting,” said Erica Harmelin, a Lower Saucon Township native and partner at Philadelphia design firm APOPp.
Weiss said the Valley’s various economic development programs, its business incubators and more are “very rare” for most communities. He said the region is ahead of others.
The Urban Land Institute, City of Allentown and the Allentown Neighborhood Improvement Zone Development Authority organized the symposium.
Here are sources for more information about the federal Qualified Opportunity Zones.
* In Allentown: allentownopportunityzone.com
* In Pennsylvania: dced.pa.gov/programs-funding/federal-funding-opportunities/qualified-opportunity-zones — the state Department of Community and Economic Development link
* The Internal Revenue Service gives information at: irs.gov/newsroom/opportunity-zones-frequently-asked-questions
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