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05.01.18

The Latest On Opportunity Zones – A New York Perspective

BY , , Bruce Baker,Aaron Yowell

On April 20th New York Governor, Andrew Cuomo, forwarded a slate of O-Zones to the U.S. Dept. of the Treasury for certification under the Tax Act that passed last December.  O-Zone designations which were previously submitted by other states have been approved by the Treasury within three weeks, so the hope is that Treasury will approve New York’s designated zones in the very near future.
 
New York designated 514 zones, 25% of the eligible census tracts in the State and the maximum permitted by law. The Empire State Development Corporation stated that the zones were selected based on recommendations from the Regional Economic Development Councils, local input, prior public investment and the ability to attract private investment. You can see the designated tracts: https://esd.ny.gov/opportunity-zones.
 
The State had indicated that it would designate a proportionate amount of census tracts in New York City.  Of the 1,221 eligible tracts in New York City 306 have been designated by the State – which equates to 25%.  Many of designated tracts in New York City encompass parcels of City-owned or controlled land which may support redevelopment, including many tracts owned by the New York City Housing Authority.  Additionally, the Governor designated the entire Brooklyn Navy Yard as an O-Zone, which will present interesting opportunities for spurring new business formation.   
 
The 208 O-Zones outside of the New York City region that were recommended are distributed across nine regions, corresponding to the Regional Economic Development Council regions.  The major Upstate cities – Buffalo, Rochester, Syracuse and Albany – all have multiple O-Zones within the city limits.  In the City of Rochester, for example, much of the central core of the city has been designated, and in the City of Buffalo, a number of O-Zones along Lake Erie have been designated.  As these cities begin to redevelop urban neighborhoods and to reclaim former industrial sites for new uses, O-Zone designation may provide a crucial element of the financing for new projects in these cities.  Outside of the large Upstate cities, a number of O-Zones containing former industrial sites such as power plants and manufacturing facilities have been designated, potentially facilitating development opportunities on these sites. 
 
Overall, it appears that the ESDC has done a careful and thoughtful job of collecting nominations and input from all regions of the state, and making recommendations in each region that are consistent with redevelopment trends and opportunities in those regions.  We will watch closely how the City and State intend to leverage the O-Zone program.  For more information on the O-Zone Program please see our previous Blogs and Alerts:  What is the Opportunity Zone?; The New Tax Act Provides Potential Avenue for Investing in Industrial and Commercial Facilities in Economically Distressed Communities; The New Tax Act Provides Potential Avenue for Repurposing/Redeveloping Closed Coal-Fired Power Plants in Economically Distressed Communities; “Investing in Opportunity Act” A New Community Development Resource, or contact us at BBaker@nixonpeabody.com; dvanamerongen@nixonpeabody.com; ayowell@nixonpeabody.com.
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Bruce J. Baker

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Aaron J. Yowell

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