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  • Pima, Tucson application for Opportunity Zones accepted

    Apr 18, 2018 | Read More News
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    The U.S. Department of Treasury has approved Pima County’s application to have several areas designated Opportunity Zones. 

    The designation allows investments made in the Opportunity Zones to become eligible for reductions on capital gains taxes. The program can help spur investment into financially challenged areas to help create new economic opportunities for the community. 

    “Pima County and our regional partners see Opportunity Zones as a shared economic development tool to encourage investment in areas of our community that might be otherwise overlooked,” said John Moffatt, Pima County Economic Development Director. “Promoting capital investments can spur job growth across sectors, improve underutilized properties, broaden the regional tax base and provide benefits to the entire community.”
    Kino Sports Complex
    Pima County and the City of Tucson were each allocated a set number of census tracts they could submit but worked closely together to coordinate their applications to maximize the chance of approval and ensure the greatest economic impact for the region. The allocated census tracts were part of an Arizona Commerce Authority coordinated submittal to the U.S. Department of Treasury for consideration under the 2017 Tax Cuts and Jobs Act.  The successful tracts include five areas along the major transportation corridor of Interstate 10. The City of Tucson portion of the application contains 21 census tracts throughout the city. 

    “The City of Tucson and Pima County's joint efforts to identify census tracts for Governor Doug Ducey's Opportunity Zones designation was yet another demonstration of the strong synergy the two jurisdictions have developed while working on economic development projects for Southern Arizona,” said Nick Ross, with the City of Tucson Economic Initiatives Office. “The City of Tucson is excited about the Governor's selections and the opportunities they present for economic activity in our region, and we look forward to future collaborations with Pima County to build on our strong partnership.”

    Pima County’s Opportunity Zones include the region south of I-10 between Valencia Road and Kino Parkway. The City of South Tucson also is included among the County designation because application guidelines required communities with populations fewer than 10,000 residents submit their applications as part of a County application. 

    The areas Pima County selected to include in the application coincide with the County’s larger economic development goals of revitalizing the southern portion of the Tucson area. These areas also were chosen in coordination with the City of Tucson, which selected among its application the northwest quadrant of I-10 and Kino Parkway, known as The Bridges. The Bridges area already has seen significant investment from major retailers like Walmart and Costco and will be the new home of GEICOTech Parks Arizona is currently reviewing development concepts for a segment of the University of Arizona’s portion of The Bridges. 

    The Opportunity Zones also encompass Pima County’s Kino Sports Complex and the acreage south of the complex the County purchased to add more soccer fields along with a mixed retail development. The resulting tax benefits should encourage more private sector investment making this a successful P3 (Public Private Partnership) development.

    In addition, an adjacent area was included as a joint County/city tract that includes the entire Tucson International Airport and surrounding areas, which includes the County’s Aerospace Research Campus as a part of the Sonoran Corridor. 

    The Sonoran Corridor is a 50-square-mile area surrounding the Tucson International Airport the County, State and Federal governments have slated for an auxiliary highway connecting Interstates 10 and 19. The inclusion of the Sonoran Corridor would help draw additional interest into this growing commercial area, which already has attracted aerospace and logistics companies. 

    The targeted census tracts are areas that have excellent available workforce that will directly benefit from investment and improved availability of higher paying jobs so this program is a win for the community, our workforce, and those who invest to make us better. 

    Click here to see a map of Opportunity Zones in Arizona. 

    Investments in the Opportunity Zones are eligible for tax reductions in the following ways: 

    • Investments held 10 years: taxable amount of the capital gains reinvested is reduced by 15 percent and no tax is owed on appreciation. For example: $100 of capital gains is reinvested into an Opportunity Zone fund and held for 10 years. Tax owed on the original $100 is deferred until 2026, and taxable amount is reduced to $85 ($100 minus $15). Investor will owe $20 of tax on the original capital gains (23.8 percent of $85). No tax is owed on Opportunity Zone investment’s capital gain. Assuming a 7 percent annual growth rate, the after-tax value of the original $100 investment is $176 by 2028.
    • Investments held 7 years: taxable amount of the capital gains reinvested is reduced by 15 percent. For example: $100 of capital gains is reinvested into an Opportunity Zone fund and held for 7 years, selling in 2025. Taxable amount is reduced to $85 ($100 minus $15). Investor will owe $20 of tax on the original capital gains (23.8 percent of $85). Assuming a 7 percent annual growth rate, the investor will owe $15 in tax (23.8 percent of $61) on the Opportunity Zone investment’s capital gain. 
    • Investments held 5 years: taxable amount of the capital gains reinvested is reduced by 10 percent. For example: $100 of capital gains is reinvested into an Opportunity Zone fund and held for 5 years, selling in 2023. Taxable amount is reduced to $90 ($100 minus $10). Investor will owe $21 in tax on the original capital gains (23.8 percent of $90). Assuming a 7 percent annual growth rate, the investor will owe $10 in tax (23.8 percent of $40) on the Opportunity Zone investment’s capital gain.
    Photo caption: The Opportunity Zones also encompass Pima County’s Kino Sports Complex and the acreage south of the complex the County purchased to add more soccer fields along with a mixed retail development.