NEWARK, NJ - Newark could soon see a boost in long-term investments due to federal legislation that created certain tax exemptions for private investors.
In April, the federal treasury department approved low-income Opportunity Zones in 75 municipalities throughout New Jersey that were nominated by Gov. Phil Murphy. Thirteen of those zones are designated in Newark.
Opportunity Zones get to reap the benefits of Opportunity Funds, which is a new class of investment vehicles for businesses that invest at least 90 percent of their capital in Opportunity Zones. In return, private investors can defer paying federal taxes on capital gains that are reinvested in these Opportunity Funds.
U.S. Sen. Cory Booker, who helped create the program, joined the governor today at Rutgers-Newark for an investors symposium panel discussion about the program.
“The Opportunity Zone Program will be a vital resource in stimulating long-term economic growth and investment in cities and towns that need it most, and more importantly, in generating economic opportunities for our residents,” Murphy said in a statement following the symposium.
The program was created by Booker and U.S. Sen. Tim Scott, a Republican that represents South Carolina, under the federal tax-reform bill in 2017. The program was also "bragged" about by President Donald Trump, Booker said.
Booker said Murphy’s nominations for Opportunity Zones in the state were strategically chosen to bring in perhaps billions of dollars to the state.
"You've got to grow your tax base,” Booker said. “You've got to grow New Jersey and (Murphy) chose areas that were so ingenious that are really going to help capital flow."
Booker noted the program could interest companies like Prudential, which has historically invested in Newark and has remained in the city since its creation.
“It's a kind of private investment in their communities which has not been there,” Newark Mayor Ras Baraka told TAPinto Newark. “It's been a race to the downtown and not in the different neighborhoods and it's an opportunity to make some of that happen.”
Eligible zones in the program were identified as low-income areas that had a poverty rate of 20 percent or a median family income of up to 80 percent of the area’s median. There are 169 zones statewide.
Most of Newark's downtown business district, bounded by MLK Blvd, the Passaic River, the Northeast Coast rail line along Route 21 and Crawford Street is within three of Newark's Opportunity Zones.
One of the Opportunity Zones in the North Ward stretches from Mt. Pleasant Cemetery north to the Belleville border between Broadway and the Passaic River.
North Ward Councilman Anibal Ramos Jr. said the stretch in the North Ward is ripe for redevelopment.
"The Opportunity Zone program provides the City of Newark a tool that will promote economic development in the areas designated," Ramos said. "I commend Sen. Booker for his creative thinking in sponsoring bi-partisan legislation that created the ground work for this important program."
Opportunity Funds are required to hold at least 90 percent of their assets in Qualified Opportunity Zone stock, partnership interests or business property.
Long-term investors in Opportunity Funds are rewarded the most by the federal government. Investments that are held for at least 10 years are permanently exempt from taxable income of capital gains from the sale or exchange of an investment in a qualified Opportunity Zone Fund.
Temporary tax deferrals on capital gains are given to other short-term investments in Opportunity Funds. The federal treasury department still has to release final guidelines for the program, Murphy said.