Skagit County opportunity zones primed for investment
Wednesday, May 08, 2019
Eddyline Kayaks Owner Scott Holley sees potential in one of Skagit County’s four opportunity zones.
He wants to build a new, expanded headquarters in Sedro-Woolley’s opportunity zone along with an industrial park to attract like-minded tenants.
“We see great value in opportunity zones to incentivize investors to get behind great projects located in places that have been starved of investor capital,” said Holley, an EDASC board member.
Opportunity zones are the product of a relatively new tax law offering investors preferential capital gains tax treatment for projects creating housing, jobs or both in economically-distressed census tracts.
Essentially, investors in opportunity zones who meet certain criteria receive capital gains tax deferrals or reductions in return for helping boost these economically-distressed census tracts.
It’s a win-win for investors and the community.
Skagit County received its opportunity zone designations in March 2018, with two in Mount Vernon and one each in Anacortes and Sedro-Woolley.
Each zone has unique and advantageous characteristics. In fact, Skagit County opportunity zones rank No. 15 out of over 300 counties nationwide, according to a report. The ranking is based on employment, GDP, population growth, poverty rates, the labor force’s educational attainment level and the number of eligible opportunity zones within each county.
Great diversity exists within Skagit County’s four opportunity zones. Anacortes’ opportunity zone incorporates much of southern Commercial Avenue and the neighborhoods north of Mount Erie Elementary School. It’s a mix of residential neighborhoods, Island Hospital, commercial establishments and the Samish Indian Nation’s tribal headquarters.
Mount Vernon’s opportunity zones include downtown, the western end of College Way and part of Skagit Valley Hospital. Sedro-Woolley’s opportunity zone stretches north from the city center through commercial and industrial areas.
Investment in opportunity zones has been slow due to a lack of clarity in the guidelines originally released in October 2018. A second round of guidelines released last month.
With the increased clarity, EDASC is taking steps to inform the business community on investing in opportunity zones.
EDASC and Community Action are hosting a free informational session on opportunity zones from 4 to 6 p.m. June 25, with more information to be provided in newsletter, website and social media announcements. EDASC is also coordinating opportunity zones education and marketing efforts with Mount Vernon Mayor Jill Boudreau, Anacortes Mayor Laurie Gere and Sedro-Woolley Mayor Julia Johnson, as well as professional advisors, the Washington Department of Commerce, and the National Development Council.
“We’ll be exploring what the communities want to accomplish with these opportunity zones,” said EDASC CEO John Sternlicht.
Sternlicht attended a two-day workshop in late April in Denver hosted by national CPA firm Novogradac on opportunity zones, taking a deep dive into the investment process.
He came away with a deeper understanding of the investment process and learned about nonprofits and other resources that assist those investing in opportunity zones. Sternlicht said opportunity zone investments are for those with a significant amount of capital, likely in the $1 million-plus range, resulting in tens of thousands to hundreds of thousands of dollars in tax savings.
Those kinds of capital gains tax savings are substantial, Holley said, but shouldn’t make or break an investment.
“Opportunity zones won’t make a bad investment suddenly become a good investment,” he said. “If it’s a fundamentally sound investment, opportunity zones provide an added benefit.”