Gilroy business leaders see a new tax incentive as a way to spur investment in the downtown corridor. But the clock is ticking on a timeline to take advantage of the opportunity.
“Opportunity zones” were created when Congress passed the Tax Cuts and Jobs Act in 2017. The act allowed the governor of each state to designate 25 percent of low-income census tracts as such a zone in which tax breaks could be available for business development.
Gilroy received two possible zones, which center on downtown and surrounding areas.
Those who invest capital into these properties in these zones are eligible to receive federal tax benefits. The longer the investor holds on to the investment, the greater the reduction in capital gains taxes.
But the opportunity zone designations only last through 2026, and the chance to receive the most tax benefits is diminishing.
John Taft of the Gilroy Downtown Business Association presented the statute to the Gilroy City Council earlier this month, urging the city to play its role in attracting investors to the city.
Among other things, Taft said the city should work on creating an opportunity zone prospectus, which outlines desired projects at specific sites. An overlay district in the zone that fast-tracks projects would also be a good step forward, he said.
Taft added that Gilroy is receiving another chance to promote economic development with the zones, following the dissolution of redevelopment agencies statewide in 2011.
“If it’s done right, it’s a golden opportunity to really work at bringing jobs here,” he said. “What I see here is a real opportunity to create incubators and accelerators that will help attract technology companies.”
Downtown Business Association President Gary Walton said other communities were able to attract investors to opportunity zones with “shovel-ready” projects and being located a reasonable distance away from major metropolitan areas.
“Our proximity to Silicon Valley makes us a prime prospect,” he said. “If you don’t do anything with it, it’s a lost opportunity.”
City of Gilroy spokesperson Rachelle Bedell said city officials are working with the Gilroy Economic Development Corporation, Downtown Business Association and Visit Gilroy/California Welcome Center Gilroy on coordinating economic development efforts.
“We look forward to assisting investors who are ready to utilize the opportunity zone benefits in Gilroy and look forward to future job creation and economic growth in our community,” she said.
Bedell said the city is currently researching establishing an opportunity fund by the Economic Development Corporation and Downtown Business Association. The city is also updating its financial incentive programs to allow applications for a wider range of business types.
The Downtown Commercial Corridor Development Incentive Pilot Program has also been implemented, she said, which provides lower-cost permitting. The program, which launched in July, ends June 30, 2020.
For information about opportunity zones, visit opzones.ca.gov.