Last week, on April 24, some Norwood community leaders gathered to learn more about the Opportunity Zone program, and what it could mean for the local economy.
Bonnie Watson, a representative of the Telluride Foundation, gave a presentation at Norwood Community Center for those in attendance. Watson told the group she was not a certified public accountant, but she had received training in the federal regulations that guide Opportunity Zones. She serves as an educator, explaining how the program works for people.
Watson said the Opportunity Zone is a tax-incentive program, established by the federal government, in order to boost struggling or changing economies while benefiting investors.
It’s temporary, however, and designed to halt in the near future.
The feds determined specific zones in 2017. There are thousands of them nationally; In Colorado, there are 126 zones. Norwood and the West End comprise one zone.
In her hour-long visual presentation, Watson explained that the Opportunity Zone program helps investors to defer taxes and sometimes even forgive taxes.
She said investors can participate in the Opportunity Zone program through establishing a business or purchasing property. “Investors” can be corporations or partnerships. But, the investment has to be for “original use.” The investment also has to start depreciating after the purchase.
Watson said the rate of return for investors is sometimes low, however. Investors are obligated to hold their investments for a seven-to-10-year time period. In this way, she said the reward is for “patient capital,” rather than a “quick flip.” This, she said, means that anyone would want to invest in the local economy should ideally have a heart for the community and wish for it to thrive.
An investor who holds an investment for the 10-year period receives a capital gains incentive. In other words, the appreciation is tax-free, which could lead to a significant amount of cash for an investor.
Watson said the regulations are detailed, and have both their strong points and weaknesses. She said a plus is that there is no limit on how much money can be poured into an Opportunity Zone area through investment. Still, she admitted she thought the program might be over-regulated.
Some people in attendance of the meeting had questions for Watson. Town Administrator Patti Grafmyer asked before the meeting why a substantial amount of improvement was required on real estate transactions in the program.
Watson said that’s because the improvements are the actual investment; a regular real estate transaction is not necessarily an investment in a community.
Additionally, community member Ken Watt asked if one structure could serve as an investor’s property, and also a separate investor’s business. Watson said that it was possible to use one building for both through the program.
She also said those who wanted to invest in the local Opportunity Zone must do so in 2019 because of the regulations and their timeline. The program is only a temporary boost for the economy.
“This was designed with startups in mind. … It gives investors a stake in the community, outside investors,” she said. “You’ve got to find someone who wants to build community and be invested in the community.”