INTRODUCTION TO OPPORTUNITY ZONES OVERVIEW Opportunity Zones OZs

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INTRODUCTION TO OPPORTUNITY ZONES

INTRODUCTION TO OPPORTUNITY ZONES

OVERVIEW Opportunity Zones (OZs) were included in the Tax Cuts and Jobs Act of

OVERVIEW Opportunity Zones (OZs) were included in the Tax Cuts and Jobs Act of 2017 Federal capital gains tax incentives for private development initiatives to attract investment and foster startup activity in distressed neighborhoods § Taxpayers can defer paying federal tax on capital gains reinvested in Opportunity Funds § Opportunity Funds must invest 90% of assets in designated low-income communities known as Opportunity Zones § Capital gains tax obligations are reduced 10% if held for at least 5 years and by 15% if held for at least 7 years § No capital gains tax due at all on the new investment’s appreciation if it’s held for 10 years 2

BENEFITS Vehicle for municipalities to steer development, businesses, and investment in distressed neighborhoods Opportunity

BENEFITS Vehicle for municipalities to steer development, businesses, and investment in distressed neighborhoods Opportunity to connect community residents with jobs and economic opportunities incentivized by the program Incentive to attract investment to vacant and blighted properties targeted for redevelopment Financing for community development projects with both public and private benefit Opportunity to strengthen and support small and locally-owned businesses, through an outside flow of capital 3

OVERVIEW Tracts must have a poverty rate of 20% or above or a median

OVERVIEW Tracts must have a poverty rate of 20% or above or a median family income up to 80% of the area (statewide) median Each state could recommend up to 25% of their eligible census tracts be designated as Opportunity Zones 4

OVERVIEW New Jersey could designate a total of 169 tracts § Included portions of

OVERVIEW New Jersey could designate a total of 169 tracts § Included portions of some wealthy towns There were 715 eligible NJ tracts in 179 towns Up to 9 of these tracts could be selected as part of the 169 if they bordered a zone and were not significantly wealthier Included a very wide array of communities Every county had eligible tracts 5

POLICY GOALS BEHIND ZONE SELECTIONS § Create diverse economic opportunity by fairly and evenly

POLICY GOALS BEHIND ZONE SELECTIONS § Create diverse economic opportunity by fairly and evenly distributing OZs across the state and within every county § Improve economic conditions in distressed communities § Support emerging opportunity for economic growth and (re)development § Utilize public-private partnerships to maximize the value of state and local investments § Support linkages to transit and other infrastructure § Seek balanced support by identifying diversity of zones throughout the state § Include urban and rural communities and commercial and residential areas 6

SELECTION PROCESS DCA worked closely with the Governor’s Office and an experienced firm with

SELECTION PROCESS DCA worked closely with the Governor’s Office and an experienced firm with knowledge and expertise on the selection process State working group convened to bring in perspectives from representatives of multiple state agencies Developed a sophisticated tool to select geographically diverse zones aligned with the Governor's policy priorities based on a formula § Relied on 2012 -16 Census data, unemployment data from DOLWD, and property tax list data from the Division of Taxation 7

SELECTION FORMULA §Formula-based approach: § Focus on geographic fairness §Every county get at least

SELECTION FORMULA §Formula-based approach: § Focus on geographic fairness §Every county get at least one tract, counties with larger populations in poverty get more §Geographic diversity within counties § Focus on truly distressed communities §Municipalities distressed on the Municipal Revitalization Index §Neighborhoods with low incomes, high unemployment rates, low property values 8

SELECTION FORMULA §Formula-based approach: § Focus on transit-friendly communities §NJ Transit Villages §Proximity to

SELECTION FORMULA §Formula-based approach: § Focus on transit-friendly communities §NJ Transit Villages §Proximity to transit hubs § Focus on leveraging existing investments §MODIV property value data 9

VALIDATION AND FEEDBACK PROCESS Validated formula-based selections: §Governor’s Office held meetings and roundtables with

VALIDATION AND FEEDBACK PROCESS Validated formula-based selections: §Governor’s Office held meetings and roundtables with mayors throughout the state to receive feedback and input §Met with the New Jersey Congressional delegation to ensure a fair and transparent selection process Obtained feedback from multiple departments and agencies (i. e. DOLWD, NJRA) Final selections were made on March 20 th and approved by US Treasury on April 9 th 10

DESIGNATED OZ TRACTS BY COUNTY Atlantic Bergen Burlington Camden Cape May Cumberland Essex Gloucester

DESIGNATED OZ TRACTS BY COUNTY Atlantic Bergen Burlington Camden Cape May Cumberland Essex Gloucester Hudson Hunterdon Mercer Middlesex Monmouth Morris Ocean Passaic Salem Somerset Sussex Union Warren Num. of Tracts 8 12 5 11 2 5 23 4 21 1 8 13 8 4 11 15 2 3 1 11 1 Share of Tracts 4. 7% 7. 1% 3. 0% 6. 5% 1. 2% 3. 0% 13. 6% 2. 4% 12. 4% 0. 6% 4. 7% 7. 7% 4. 7% 2. 4% 6. 5% 8. 9% 1. 2% 1. 8% 0. 6% 6. 5% 0. 6% Share of Poor Pop. 4. 4% 7. 3% 3. 0% 7. 0% 1. 0% 2. 8% 14. 0% 2. 4% 12. 1% 0. 6% 4. 2% 7. 6% 5. 0% 2. 4% 6. 8% 8. 8% 0. 9% 1. 8% 0. 9% 6. 2% 0. 9% Number of tracts by county closely tracks their shares of the state’s lowincome population (below poverty level) 11

DESIGNATED OZ TRACTS BY MUNICIPALITY Municipality Atlantic City Egg Harbor township Pleasantville Somers Point

DESIGNATED OZ TRACTS BY MUNICIPALITY Municipality Atlantic City Egg Harbor township Pleasantville Somers Point Cliffside Park Englewood Fairview Garfield Hackensack Lodi S. Hackensack Twp. /Teterboro Palmyra Riverside Burlington city Pemberton township Willingboro Camden Pennsauken Lindenwold Pine Hill Lower township Wildwood/W. Wildwood County Atlantic Atlantic Bergen Bergen Burlington Burlington Camden Cape May # 4 1 1 1 1 3 3 2 1 1 1 7 2 1 1 Municipality Bridgeton Millville Vineland Newark East Orange Irvington Orange Woodbury Deptford Twp. Glassboro Jersey City Bayonne Kearny North Bergen West New York Union City Flemington Trenton Hamilton Twp. Carteret Perth Amboy New Brunswick South River Jamesburg County Cumberland Essex Gloucester Hudson Hudson Hunterdon Mercer Middlesex Middlesex # 2 13 3 3 4 1 1 2 1 2 1 4 1 7 1 1 4 6 1 1 Municipality Red Bank Long Branch Asbury Park Neptune Twp. Neptune City Freehold Dover Wharton Lakewood Twp. Manchester Twp. Berkeley Twp. Clifton Passaic city Paterson Prospect Park Carneys Point Twp. Salem Bound Brook North Plainfield Sussex Elizabeth Hillside Twp. Linden Rahway Plainfield Phillipsburg County Monmouth Monmouth Morris Ocean Passaic Salem Somerset Sussex Union Union Warren # 1 2 2 1 1 1 3 1 6 3 2 2 4 8 1 1 1 2 1 1 5 1 2 1 § Total Towns = 75 § Total Tracts = 169 § Roughly 1 in 8 NJ towns got a zone (13%) § 42% of all eligible towns got an OZ. 12

OPPORTUNITY ZONES MAP Confidential 13

OPPORTUNITY ZONES MAP Confidential 13

NJ OPPORTUNITY ZONE STRATEGY 14

NJ OPPORTUNITY ZONE STRATEGY 14

PURPOSE OF STATE STRATEGY Position New Jersey as a competitive state for attracting Opportunity

PURPOSE OF STATE STRATEGY Position New Jersey as a competitive state for attracting Opportunity Fund investments Synthesize various state resources for the most optimal impact for redevelopment, business growth and job creation within the Opportunity Zone communities Promote inclusive and equitable development and investment Draft – Confidential, Not for Distribution 15

GUIDING PRINCIPLES Supporting existing communities by unifying the full strength and resources of the

GUIDING PRINCIPLES Supporting existing communities by unifying the full strength and resources of the State as appropriate, to attract local partnerships that drive economic growth and measurably better community outcomes Balancing equitable and inclusive development with the need to attract modern services and 21 st century entrepreneurship Executing the state’s commitment to diversity and equitable growth and prosperity by promoting and creating opportunities for the inclusion of minority, women and small business enterprises within opportunity zones Promoting development across different kinds of investors and varying levels of investment type Draft – Confidential, Not for Distribution 16

GUIDING PRINCIPLES Building partnerships with foundations, non-profits, and grant makers to facilitate capital flows

GUIDING PRINCIPLES Building partnerships with foundations, non-profits, and grant makers to facilitate capital flows to each Zone Engaging stakeholders from across the community and developer landscape to advance pro-smart growth development Focusing on transit-oriented development Draft – Confidential, Not for Distribution 17

TARGETED OUTCOMES Lower unemployment through job opportunities that OZ residents can access (through training,

TARGETED OUTCOMES Lower unemployment through job opportunities that OZ residents can access (through training, mentorship programs and other incentives) Economic opportunities for residents of distressed rural and urban communities across New Jersey Locally appropriate investment and development that strengthens existing communities Safe places for residents to work, live, and enjoy recreational activities Inclusion of new and enduring locally owned businesses, including small, minority, and women owned business enterprises in OZ redevelopment activity which results in increased participation and is consistent with state set aside procurement goals Sustainable transit-oriented communities Increased entrepreneurship Redevelopment of underutilized, vacant and contaminated properties Draft – Confidential, Not for Distribution 18

KEY ACTORS There are five primary actors that will play major roles in the

KEY ACTORS There are five primary actors that will play major roles in the advancement of Opportunity Zones: §State of New Jersey §Municipalities §Developers §Investors and business owners § Including social entrepreneurs and non-profit investors §Community residents and non-profit organizations § Including foundations and larger non-profits Draft – Confidential, Not for Distribution 19

OPPORTUNITY ZONES STRATEGY es, State id , gu t r s po up urce

OPPORTUNITY ZONES STRATEGY es, State id , gu t r s po up urce s , o g s inin d re Tra an y ke d n o o an s Inf jects ritie o pro l pri a loc Municipalities Community residents and nonprofit orgs Input and feedback on local priorities x ta to nd rd. s a co s al c tie ov s a ri pr ive rio Ap ent al p c c in lo Comm. updates & engagement. Connections to OZ job opps. Community projects Loans, tax incentives, technical assistance (MWBEs), guides, info & resources Investors and Business Owners OZ business development & expansion x , ta s an n. Lo ince , es tiv des, i gu fo & s in urce o res Development projects Developers Capital OZ real estate development 20

OPPORTUNITY ZONE STRATEGY – STATE ROLE “One-Stop-Shop” website Asset map with availability of state

OPPORTUNITY ZONE STRATEGY – STATE ROLE “One-Stop-Shop” website Asset map with availability of state tax and development incentives Digital Marketplace matching investment opportunities to investors Providing Opportunity Zones resources for investors, municipalities, and residents Public list of pipeline “ready to go” projects Technical assistance forums for “Ready to Go” projects “How to” guides Training, educating, and supporting municipalities in leveraging their Opportunity Zones for the right kinds of development and investment Supporting small, minority and women owned businesses participation in OZ projects Resources for entrepreneurs in Opportunity Zones Engage industry membership orgs & chambers of commerce to educate about OZs 21

OPPORTUNITY ZONE STRATEGY – STATE ROLE Promoting locally appropriate investments in OZs through State

OPPORTUNITY ZONE STRATEGY – STATE ROLE Promoting locally appropriate investments in OZs through State financing Extra points for OZs on lender loan and grant applications from State financing entities (NJRA, EDA, HMFA, DCA) Special state incentives in OZs with Transit Villages (DOT grants, special technical assistance) Promoting transit-oriented development Evaluating progress in Opportunity Zone neighborhoods and reporting results Promote walkable mixed-use neighborhoods close to transit (i. e. Neighborhood Preservation and Main Street NJ programs) State-funded transportation infrastructure projects in OZs 22

OPPORTUNITY ZONE STRATEGY – MUNICIPAL ROLE Channel appropriate businesses, investment, and development into Opportunity

OPPORTUNITY ZONE STRATEGY – MUNICIPAL ROLE Channel appropriate businesses, investment, and development into Opportunity Zones through the use of tax incentives and planning, zoning, and permitting processes Advancing local and municipal development priorities in OZs Redevelopment of vacant and blighted properties to better uses Inclusionary zoning Developing an affordable housing production and preservation strategy (if appropriate) Special mandates for OZ projects receiving municipal funds or tax incentives Mandatory contribution to an affordable housing trust fund, etc. Special incentives for redevelopment of new affordable housing Requiring small, minority and women owned businesses participation in projects Requiring real estate development to fund and facilitate a community engagement and input process Local hiring preference for construction jobs related to development projects Requirement to develop post-construction job opportunities for residents (especially harder-to-employ) 23

OPPORTUNITY ZONE STRATEGY – MUNICIPAL ROLE Leverage local workforce development and job training programs

OPPORTUNITY ZONE STRATEGY – MUNICIPAL ROLE Leverage local workforce development and job training programs to build resident skills to connect to jobs Connect municipal, county, Workforce Investment Board, and CDC job training programs to new OZ businesses and projects Information about housing opportunities Focus on communications & outreach to neighborhood organizations and community residents on local opportunities from OZs OZ investments for community projects (i. e. health care facilities, grocery stores) Job and job training opportunities from new businesses and development Updates on OZ developments Provide information to State on key OZ projects and local development priorities 24

OPPORTUNITY ZONE STRATEGY – DEVELOPERS Housing projects Advance real estate development projects within Opportunity

OPPORTUNITY ZONE STRATEGY – DEVELOPERS Housing projects Advance real estate development projects within Opportunity Zones Retail businesses Industrial projects Office buildings Community facilities Engage investors in Opportunity Zone development projects 25

OPPORTUNITY ZONE STRATEGY – INVESTORS AND BUSINESS OWNERS Fund development projects, businesses, and business

OPPORTUNITY ZONE STRATEGY – INVESTORS AND BUSINESS OWNERS Fund development projects, businesses, and business expansions in Opportunity Zones Receive Opportunity Fund capital to expand businesses (business owners) Hire and employ local residents 26

OPPORTUNITY ZONE STRATEGY – COMMUNITY RESIDENTS AND NON-PROFITS Provide input and feedback on local

OPPORTUNITY ZONE STRATEGY – COMMUNITY RESIDENTS AND NON-PROFITS Provide input and feedback on local priorities to municipalities Communicate neighborhood needs Communicate local concerns about incoming development Develop projects of communitybenefit that could be funded by OZ investment 27

OZ RESOURCES One-stop-shop website for information, resources, guides, maps, and rules on New Jersey’s

OZ RESOURCES One-stop-shop website for information, resources, guides, maps, and rules on New Jersey’s Opportunity Zones § Interactive community asset map § Guides on key topics – strategic planning, using data to market Opportunity Zones, measuring and monitoring outcomes § Links to rules, guidelines and information from the US Department of the Treasury § Dedicated state email address for questions § Digital Marketplace matching Opportunity Zone investment opportunities to investors 28