Local leaders hope several low-income census tracts around Astoria and Warrenton can attract outside investment as part of a new federal tax incentive known as opportunity zones.
Investors hold trillions in pretax capital gains, according to the Economic Innovation Group, a Washington, D.C., based think tank that backed the creation of opportunity zones. The capital gains would usually be taxed by the federal government by up to 20 percent.
The Tax Cuts and Jobs Act passed last year created opportunity zones, low-income census tracts designated by the state where investors can put pretax capital gains into projects and defer payment until the end of 2026. The taxes on those capital gains can decrease by as much as 15 percent on investments of at least seven years. In addition, any profits from an opportunity zone investment of 10 years or more can be free from capital gains taxes.
Jim Knight, executive director of the Port of Astoria, submitted four census tracts — three covering Astoria and another covering parts of Warrenton and the Astoria Regional Airport — for the state’s consideration. Gov. Kate Brown has until April 20 to nominate up to a quarter of the state’s low-income census tracts for federal certification as opportunity zones.
“From my perspective, with the Port being responsible for economic development … I really felt that the opportunity zone was one of the best ways to help with that,” Knight said, adding the capital could help Port tenants expand and the agency rebuild dilapidated infrastructure.
Walt Postlewait, an executive vice president for regional nonprofit lender Craft3, said the program provides an incentive for investors to put money into higher-risk areas.
“In the end, development is a numbers game, and costs are often high on the coast,” Postlewait said, detailing the difficulties rural areas have in matching the returns on investment seen in larger urban areas. “We need some advantage out here from a numbers standpoint.”
Warrenton Mayor Henry Balensifer, spokesman for electric tug manufacturer Lektro, supported Knight’s application for the area around the airport and county business park.
“There’s been no groundbreaking industrial development, and that’s what we want,” Balensifer said. “That’s where you get the family-wage jobs. It’s the traded sector.”
One piece of low-hanging fruit for a project could be an incubator space to help smaller businesses grow before a capital-raising campaign, Postlewait said, or lowering the costs for developers to build workforce housing mixed with commercial spaces.
“It’s an intriguing tool that could help draw capital into these low-income areas,” Postlewait said. “Most of the questions are about how the rules will be written to make sure investments benefit low-income communities.”
Opportunity zones are separate from enterprise zones, in which state property taxes on new developments can be exempted for three to five years. The state has nearly 70 enterprise zones, including the Clatsop Enterprise Zone covering Warrenton, the airport and the county business park.