The Lehigh Valley has several factors in its favor that could allow the region to take particular advantage of the Qualified Opportunity Zones, a newly-created federal tax incentive program signed into law late last year.
These zones, created as a result of the federal tax overhaul legislation in December, forgive capital gains on commercial or residential projects in designated areas under certain conditions, promoting and incentivizing long-term investment in low-income communities.
Qualified Opportunity Zones have been established throughout the United States, including several tracts in Allentown, Bethlehem, and Easton. These incentives were the subject of a symposium held at the Renaissance Allentown Hotel on Oct. 18.
The Lehigh Valley’s other existing incentive programs, its positive local government environment, and its community of developers and officials knowledgeable about projects put the region in a better position than other places to take advantage of the Qualified Opportunity Zones, former U.S. Rep Charlie Dent said at the symposium.
“The fact that you can layer these Opportunity Zones overlap other incentives like the Allentown NIZ or the Bethlehem CRIZ will likely give good benefits to our area,” Dent told a crowd of more than 200 people. “And here in the Lehigh Valley we have a lot of people with a lot of expertise and knowledge about projects to organize, so that’s to our advantage as well.”
J.B. Reilly, president of City Center Investment Corp., said the areas that can best mitigate risk will be able to take advantage of the Qualified Opportunity Zones. That is a plus for Allentown, which is already undergoing an economic rejuvenation thanks in part to the Neighborhood Improvement Zone (NIZ).
“What we have here in Allentown is perhaps unique to anywhere else in the country,” Reilly said. “So the question is, how do we make sure the people investing are aware of the potential opportunities here? Because they haven’t seen anything like it.”
Reilly said the Lehigh Valley may also benefit from already having shovel-ready projects, as well as a strong cooperative relationship between the business community and local government officials.
“What really sets communities apart is just functioning like a community,” said Evan Weiss, a director of PEL Analytics. “There are very few restrictions on what kind of investments you can make. But the zones also have very specific deadlines, so if you can’t move quickly, you will have trouble meeting the statutory definitions of the law.”
Formal regulations for the Qualified Opportunity Zones are currently being reviewed by the Office of Management and Budget and are expected to be released any day now, according to Dent.
But even with those regulations not yet complete, the Lehigh Valley is already seeing projects that are anticipated to benefit from the opportunity zones.
In Southside Bethlehem, a former ice plant and cold storage warehouse on the Lehigh University campus is being redeveloped into 30 residential apartments, ground floor retail, and a restaurant. Construction has already begun and is expected to be completed in June 2019.
Funding for the project is being provided in part through the use of historic tax credits and traditional financing with PNC Bank’s Community Development Banking, according to PNC. But the project also fits within one of Bethlehem’s Qualified Opportunity Zones, and it is anticipated it will take advantage of those incentives as well.
“We view this program as a natural extension of what we do every day in terms of creating community development lending in the pursuit of projects intended to benefit communities in need of reinvestment,” said Kevin Rogers, senior vice president of Community Development Banking at PNC Bank.
The Lehigh Valley Economic Development Corporation (LVEDC) provided input to Gov. Tom Wolf’s office earlier this year about possible Lehigh Valley tracts to include in Pennsylvania’s Qualified Opportunity Zones. Other tracts suggested by LVEDC were not included in Wolf’s list.