City votes support for Opportunity Zone
MARSHALL — Last year, Congress created a new kind of development program, which offers tax incentives for investing capital gains in American communities. And it has the opportunity to benefit the cities of Marshall and Tracy, said Marshall Economic Development Authority Director Cal Brink.
“On the surface, it looks very promising,” Brink said, talking to the Marshall City Council on Tuesday. Brink was in front of the council to ask for its support of Lyon County applying for the new Opportunity Zones program.
The proposal did get that support, from a majority of council members.
Brink started a short presentation to the council Tuesday night by explaining a little bit about the Opportunity Zones Program. The program was established by Congress as part of the 2017 Tax Cut and Jobs Act.
Opportunity Zones are “something that’s kind of hit us a little bit fast and furious,” Brink said. Not all of the details of the program have been worked out with the state and federal government. However, he said, it appeared to have potential for attracting investment to communities like Marshall.
The Opportunity Zones program is designed as an incentive for investing unrealized capital gains in economically distressed communities, Brink said.
“They’re phrasing this as unlocking private capital,” he said.
Brink said the program includes three incentives for investors with unrealized capital gains. First, investors can defer paying capital gains taxes until 2026, by keeping unrealized capital gains in an Opportunity Fund, connected to an Opportunity Zone. Second, keeping capital gains in an Opportunity Fund for five years or longer reduces the amount of deferred taxes an investor would have to pay. Third, any capital gains on investments made through the Opportunity Fund will accrue tax-free, as long as the investor holds them for at least 10 years.
State governors are authorized to designate a quarter of their states’ eligible low-income census tracts as Opportunity Zones. In Minnesota, this means Gov. Mark Dayton can set 133 Opportunity Zones, Brink said.
And that’s where opportunities for Tracy and Marshall come in, Brink said. One of Marshall’s three census tracts qualifies to be an Opportunity Zone. The city of Tracy’s census tract also qualifies. If Lyon County applies for those two Opportunity Zones, Brink said, “Hopefully, the state would designate both of them.”
Brink said he was working on getting the application together. The governor has 90 days after March 31 to make recommendations for Opportunity Zones, so Lyon County’s application would need to be turned in by then, Brink said.
Having an Opportunity Zone could benefit Marshall, Brink said. Marshall’s eligible census tract covers the northern part of town, including some prime areas for development, like the new industrial park expansion and undeveloped properties near the Red Baron Arena and Expo.
Council member Glenn Bayerkohler questioned whether the council should voice their support for the Opportunity Zone application so soon. Bayerkohler said the proposal was brought to the council without time to review it beforehand. He wanted more time to go over the proposal.
On the other hand, Marshall Mayor Bob Byrnes asked, “What’s the downside of us taking action, if any?” Byrnes and other council members noted that supporting the application wouldn’t really involve further action or up-front funding from the city.
The council voted 6-1 in favor of voicing support for an Opportunity Zone application. Bayerkohler cast the dissenting vote.