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Officials talk Wood County Opportunity Zones

Photo by Brett Dunlap Aaron Sporck, director of economic development for Sen. Shelley Moore Capito, R-W.Va., makes a presentation on Opportunity Zones in Parkersburg as Lindsey Piersol, executive director of the Wood County Development Authority, looks on.

PARKERSBURG — Opportunity Zones are providing an opportunity for investment across the state for new businesses.

Aaron Sporck, director of economic development for Sen. Shelley Moore Capito, R-W.Va., was in Parkersburg Wednesday for a presentation on Opportunity Zones with many area business and development leaders.

The U.S. Department of Treasury recently certified 55 Opportunity Zones across West Virginia that are now eligible for a new federal tax incentive designed to encourage private investors to make capital investments in those areas.

Opportunity Zones are a mechanism to encourage investment in underserved communities across the nation, Sporck said. The goal is to spur long term investment in low-income urban and rural communities; to create economic and community development; and to create more opportunities for startups and new businesses.

There are approximately $2.6 trillion of unrealized capital gains held by U.S. investors; Opportunity Zones present a tax preferred method to reinvest those gains, he added.

“There are two zones here in Wood County with the rest spread across the state,” Sporck said. “It means that you are eligible for investment through Opportunity Funds. The only way you can benefit from the tax incentives is to invest in an Opportunity Fund.”

The zones for Wood County are the Downtown Central Business District and the mixed manufacturing, commercial and residential areas near U.S. 50 and the Little Kanawha River, said Lindsey Piersol, executive director of the Wood County Development Authority.

Sporck said the rules for the fund formation are not out yet as those are going through the process to be formalized, including public comment and the U.S. Treasury Department’s review of those comments and through other government offices for review, including the White House.

Opportunity Zones were created and added to the federal tax code as a result of the Tax Cuts and Jobs Act of 2017, that was approved by Congress on Dec. 22, 2017. Qualified Opportunity Zones retain the designation for 10 years.

Opportunity Funds may be used to support startups, invest in small businesses, and for real estate development projects.

“The way Congress envisioned this is if I had a building in downtown Parkersburg, I sell it and as part of the sale of that asset, I realize ($500,000) worth of capital gains,” Sporck said. “If I want to buy another building in Parkersburg to redevelop it, I can deploy that capital into another building through an Opportunity Fund that I set up myself.

“The process for this is a self-certification system where you notify Treasury that you are going to redeploy gains that you have achieved through the appreciation of an asset and that you are going to redeploy those gains into an Opportunity Fund.”

Benefits for investors include those who reinvest their unrealized capital gains into an Opportunity Fund will be provided a deferment of capital gain realization for investments held in a Opportunity Fund for five years or less; investments held between five-seven years, the investor will benefit from a capital gain reduction of 10 percent; investments held between 7-10 years, the investor will benefit from an additional capital gain reduction of 5 percent; and investments held beyond 10 years, the investor no longer has a capital gain obligation.

Investors can invest in stocks and partnership interests.

Some local business leaders questioned how well this kind of investment could work.

Tres Ross of the Ross Foundation said with a $7.5 million project the cash flow variance would be “very tight.”

“It is razor thin,” he said. “In terms of making this work, I am not sure it would work.”

He ran multiple numbers and talked with many people and there appears to be quite a bit of risk, especially over the number of years being discussed, Ross said.

“You are trying to get other investors to eventually invest in the town,” he said. “Do you want to take that risk for 10 years and see if it works? I want it to work, but after what I have run I don’t think it will work.”

Ed McDonough, chairman of the Wood County Development Board, said he sees this as an attraction to a business that is expected to grow substantially and be able to shelter future gains as opposed to making a marginal project work.

Sporck said the purpose of the program is for people to invest in areas.

“The goal is to attract capital in areas where previously it has not been successful,” he said. “The reward for doing that is you get out of the investment after 10 years when property values have been built up.”

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