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New federal program expected to help Akron communities
Akron officials are hoping the Opportunity Zone program, which was created by the Tax Cuts and Jobs Act of 2017, will help attract developers to the former Rolling Acres Mall as well as at other sites in the city and surrounding communities. The city now owns the bulk of the land where the mall once thrived. Officials say the area is ripe for new development. Pictured here is an aerial view of the redevelopment area. (Photo courtesy of the City of Akron).
SHERRY KARABIN
Legal News Reporter
Published: July 13, 2018
It’s been almost eight years since the Rolling Acres Mall in Akron closed in October 2008, leaving only two department stores, JCPenney and Sears, open for business.
Both have since shut down and today Pinnacle Recycling is located in the former Sears store. There are two other businesses operating as well.
Once considered a “gem” among malls, the bulk of the land is now owned by the city of Akron, which recently demolished the old structures to make room for new development.
Akron officials are now hoping the Opportunity Zone program, which was created by the Tax Cuts and Jobs Act of 2017, will help attract developers to the area as well as at other sites in the city and surrounding communities.
The program seeks to encourage long-term private investment in rural and urban low-income communities through the use of temporary tax incentives, in an effort to boost economic growth and create jobs.
Governors in each state, along with the mayor of Washington, D.C., were asked to identify up to 25 percent of their state’s low-income, high poverty census tracts and submit their selections to the U.S. Department of Treasury for possible certification.
In Ohio officials and business groups sent their choices to the state Development Services Agency. Gov. John Kasich then reviewed the information and came up with a list of 320 census tracts, which he recommended to the government for designation as Opportunity Zones.
On April 18, the Treasury Department announced that all 320 tracts nominated by Gov. Kasich had been certified as Qualified Opportunity Zones, including 16 in Summit County. Thirteen of the tracts are in Akron, including the space once occupied by the Rolling Acres Mall.
Akron Deputy Mayor for Integrated Development and Chief of Staff James Hardy said officials are pleased with the number of Opportunity Zones afforded to Summit County.
“We worked with the county, neighboring communities and the Fund for Our Economic Future to put together our submissions to the state, which were approved by the governor and the Department of Treasury.
“I would say we received our fair share of Opportunity Zones and we plan to put them to good use,” said Hardy. “Our hope is that these zones result in more money flowing into existing businesses and lead to the start of many new projects.”
Of all the communities selected as Opportunity Zones, Hardy said Kenmore is the “most ripe for redevelopment.
“It is a tight knit community with deep roots, with advocates who have been very well organized and articulate about the type of development that they would like to see,” said Hardy.
“I think any revitalization that occurs in Kenmore will also help the neighboring community of Barberton, which is also in need.”
Hardy said downtown Akron, which was also certified as an Opportunity Zone, is expected to reap many benefits.
“Downtown Akron is certainly shovel ready,” said Hardy. “Between the Bounce Innovation Center, the Innerbelt and Main Street, the sky is the limit for investment.”
Madison Lisotto Whalen, an associate in the Public Law Group at Roetzel & Andress said now that the certification process is complete, the next step is establishing the Opportunity Funds.
“The funds are the actual investment vehicles that allow for investment in the zones,” said Whalen. “The federal government is expected to release more information on how to set up these funds over the next couple of months.
“The model that has been set up allows investors to aggregate their resources into one of these funds, thereby increasing the magnitude of investments going to an Opportunity Zone.”
She said the program is designed to encourage developers and others to use capital gains to invest in these Opportunity Zones by providing them with a temporary tax deferral that reduces their tax burden in increments based on how long they leave the money in the fund.
“For example, 10 percent of the original deferred gain is excluded from tax if the money remains in the fund for five years and another five percent, for a total of 15 percent, of the original deferred gain is excluded from tax if the investment is held for seven years.
“If the investment is held for 10 years, they receive a permanent exclusion from paying taxable income on capital gains from the sale or exchange of an investment in the fund,” said Whalen. “This means that any appreciation resulting from a 10-year investment in an Opportunity Zone Fund would be tax free.”
“The Opportunity Zones are but one tool the city is using to attract development,” said Hardy. “I believe they offer incredible promise, but they are as yet untested so we will have to see how things play out.”