NEWARK, NJ - Newark is the first spot where Prudential Financial and The Rockefeller Foundation are hoping to show the nation that Opportunity Zones aren't just another big tax giveaway that will push out longtime residents.
The two groups are giving Newark a $920,000 two-year grant to help attract investors to Opportunity Zones, designated economically depressed areas where private investors get tax incentives. Part of the funds will pay for a chief Opportunity Zone officer for the city to help prioritize transactions that will have the most impact.
Rajiv Shah - who heads the philanthropic foundation created in 1913 by the oil giant, John D. Rockefeller - shared the news today during the Forbes Opportunity Zones Summit at the Newark Museum. Newark will be the first of five other soon-to-be-announced cities to receive a cut of the total $5.5 million grant.
“Our commitment and our hope for Newark - and our belief in the leadership of the mayor and of the public-private partnership that exists here - is that we use Newark to demonstrate what's possible in terms of lifting up community members,” said Shah.
The two organizations will work through Newark Alliance for the grant. The funds also create positions for two specialists who will help spur community engagement for Opportunity Zone projects and businesses.
Opportunity Zones are a bi-partisan effort created under the 2017 Tax Cuts and Jobs Act. The legislation was co-sponsored by U.S. Sen. Cory Booker, a Democrat, and was even praised by President Donald Trump.
Whenever an investor divests in appreciated stocks or real estate, they secure capital gains that are taxable. But if an investor reinvests their capital gains immediately into an Opportunity Fund, they can delay and reduce that taxable amount.
The longer an investor keeps their money in an Opportunity Fund within a designated zone, the more they reduce their tax liability. Those who invest in the designated area for at least 10 years pay zero taxes on the appreciation gained in the Opportunity Fund.
“Ultimately, if you're an investor going into one of these zones, with some fly-by-night operator who doesn't have deep roots in the community, good luck making financial returns,” said Ommeed Sathe, who heads impact and responsible investing at Prudential. “On the other hand, if you actually make an investment that's got a 10-year hold period, you're inexplicably linked to the future of the city.”
The program is supposed to spur investment in tracts that have been overlooked by investors, like areas that are burdened by blight or are in need of environmental cleanup. Investors have to either buy stock in a business that operates within a zone or purchases property in the designated area.
But some are concerned that attention given to the city from investors will give rise to gentrification. Mayor Ras Baraka says that won't happen because of the city's inclusionary zoning and anti-gentrification commission.
“They don't trust that money coming into the community because the history of it has proven to be detrimental to folks that have lived here for various long times,” Baraka said at the summit. “So I take all the abuse and all the other things that I get because I see something further down the road that we can create, that we can develop.”
Newark’s Downtown business district is designated as an opportunity zone. Areas along South 12th Street in the West Ward, Weequahic and North Broadway also have zones. The East Ferry and Ironbound industrial area are also included.