Tucked inside President Trump’s 2017 tax overhaul package is an incentive that offers investors huge tax breaks for developing in designated underserved areas the government calls Opportunity Zones.
The stated goal of the program is to attract investment to areas that are usually overlooked, creating jobs and opportunities in historically poor and disadvantaged areas.
It’s no secret El Paso is home to some of the state’s poorest ZIP codes. And incomes here are among the lowest, if not the lowest, of any large city in the country.
And yet Travis County (Austin) has 21 areas that have been designated Opportunity Zones, Bexar County (San Antonio) has 24 and El Paso County only has 16.
But that number obscures a grimmer reality. Only six of El Paso’s Opportunity Zones are within the city limits. And some of the largest of the zones encompass empty swaths of desert beyond El Paso’s far Eastside where there is no water or sewer service – or even paved roads.
How much impact the incentive will have nationwide is still unknown, but El Paso is missing an opportunity.
“Financial firms have been raising billions of dollars to invest in these zones,” the Wall Street Journal reported in February. “Real-estate values there have started to rise as speculators have started to snap up property.”
The census tracts that were designated Opportunity Zones were selected based on recommendations by the nation’s governors who relied, in part, on recommendations by local governments.
An official with the city of El Paso’s economic development department said they did participate in that process, recommending 20 to 30 census tracts.
Some of the areas that were ultimately selected came as a surprise to the city, he said. Among them were some they had not recommended, including one on the far Westside that is split between a portion of the state park, which can’t be developed, and one of El Paso’s fastest growing areas, which doesn’t need incentives.
How the incentive works is complex, but the bottom line is it delivers a windfall, in the form of avoided capital gains taxes, to investors willing to risk their money in areas hobbled by high poverty and slow business growth.
Chances are, if you live in El Paso, you haven’t heard of the tax break. While projects are underway in some cities, the incentive is mostly unknown here.
The city says it is developing a website and other programs to promote the incentive – a one-stop shop for investors interested in the zones. But it isn’t ready yet, and El Paso is already late to the game.
Many cities have aggressively marketed their Opportunity Zones, creating interactive maps of the zones and web pages describing the benefits. They have held public meetings and press conferences, as well as offered the services of their economic development staff.
Articles in Austin and Dallas newspapers describe how investors in those cities are “cashing in.”
Next door to El Paso, in New Mexico, the state’s economic development arm hosted an Opportunity Zone forum last Tuesday. That day the state also unveiled an incentive program that offers a $1 million bonus to investments in Opportunity Zones that meet certain benchmarks.
Of course, the tax break isn’t without controversy with some experts questioning whether it will help residents of poor neighborhoods or displace them – or if the incentive is effectively a tax cut for gentrification. Others worry about the potential price tag.
Even so, it’s one tool communities are using to attract investment to areas that are usually overlooked, and El Paso, one of the state’s most overlooked cities, could miss out.
Want to know more? A good place to start is the article “Opportunity Zones in Texas: Promise and Peril” at dallasfed.org. It includes an interactive map of the zones.