Introduction to Opportunity Zones

1. Introduction to Opportunity Zones

2. 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

3. 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

4. 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

5. OVerview • New Jersey could designate a total of 169 tracts • Included portions of some wealthy towns • There were715eligible NJ tracts in179towns • Up to9of 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

6. 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

7. 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

8. 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

9. 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

10. 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 20th and approved by US Treasury on April 9th

11. Designated OZ Tracts by County • Number of tracts by county closely tracks their shares of the state’s low-income population (below poverty level)

12. Designated OZ Tracts by Municipality • Total Towns = 75 • Total Tracts = 169 • Roughly 1 in 8 NJ towns got a zone (13%) • 42% of all eligible towns got an OZ • .

13. Opportunity Zones Map Confidential

14. NJ Opportunity zone strategy

15. 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

16. 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 21st 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

17. 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

18. 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

19. 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

20. Opportunity Zones Strategy Training, support, guides, and resources Municipalities State Loans, tax incen-tives, guides, info & resources Loans, tax incen-tives, technical assistance (MWBEs), guides, info & resources Info on key projects and local priorities Comm. updates & engage-ment. Connec-tions to OZ job opps. Input and feedback on local priorities Approvals and tax incentives accord. to local priorities Developmentprojects Developers Investors and Business Owners Community residents and nonprofit orgs Community projects Capital OZ business development & expansion OZ real estate development

21. Opportunity Zone Strategy – State Role

22. Opportunity Zone Strategy – State Role

23. Opportunity Zone Strategy – Municipal Role

24. Opportunity Zone Strategy – Municipal Role

25. Opportunity Zone Strategy – Developers

26. Opportunity Zone Strategy – Investors and Business owners

27. Opportunity Zone Strategy – Community Residents and Non-ProfiTs

28. 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