Congress' Opportunity Zones Program Stimulates Investment in Westchester's Low-Income Areas
The program creates new investment options while striving to benefit local neighborhoods.
Peekskill developer Louie Lanza’s QOF fund aims to help revitalize the city.
Photo by Ken Gabrielsen
If you hear a boom emanating from the Westchester County commercial real estate community, don’t be alarmed: It may just be that industry’s reaction to the arrival of the Opportunity Zones program. Established by Congress in the Tax Cuts and Jobs Act of 2017, the Opportunity Zones program creates designated opportunity zones in low-income areas (also referred to as distressed census tracts) where “opportunity funds” are earmarked to stimulate investment in local businesses and properties. Westchester is home to 12 such zones within eight municipalities, including the cities of Mount Vernon, New Rochelle, Peekskill, White Plains, and Yonkers, the towns of Cortlandt and Mount Pleasant, and the village of Port Chester. Though the Opportunity Zones (OZ) program itself is not brand-new, the trigger for the heightened enthusiasm among both local government and developers is the finalization of applicable IRS regulations in April.
According to Bridget Gibbons, Westchester County’s Director of Economic Development, “The vision is that these zones would be invested in and become revitalized, leading to growth and job creation.” Ultimately, she adds, “The goal is to help improve the quality of life for both the Westchester residents living in these zones and all county residents.”
The key for investors, which can include not-for-profit corporations, is that OZs incentivize long-term investment in communities by offering substantial tax breaks on capital gains (and only capital gains) to those who invest in a Qualified Opportunity Fund (QOF) for a minimum period of time. In fact, QOF investments — which are currently facing a deadline of December 31, 2019 (though efforts to extend the deadline are underway) — will be eligible for a 100% capital-gains tax break, as long as they remain invested for at least 10 years. There are also tax incentives for five- and seven-year fund commitments, offering deferrals of 10% and 15%, respectively.
Vince Ferrandino of Ferrandino & Associates Inc., an Elmsford-based planning consulting firm, has been retained by the County to assist local municipalities with implementing and maximizing the benefits of the Opportunity Zones program. Ferrandino’s firm is additionally charged with connecting these municipalities with eager investors.
“Right now, there is incredible opportunity, and municipalities can really make this work for them,” Ferrandino explains. “The tax benefits are tremendous, and so many investors are going to want to take advantage of services while also lifting up a community in need.” Ferrandino adds that the program is neither intended for property flippers nor will the local gentrification the program may engender be allowed to result in the mass displacement of indigenous residents. “You want to make sure that the people who are living and working in those zones are protected,” says Ferrandino.
The ABCs of QOFs
County Executive and Democrat George Latimer is all in, even though the program was spawned by the same controversial, GOP-driven tax-cut bill pushed by the Trump administration. “My administration is focused on advancing Westchester’s economy — and to do that best, we must take full advantage of all potential avenues afforded to us,” Latimer explained at a press conference earlier this year. “The Opportunity Zones program is a perfect example of one of these avenues,” added the county executive, who was joined onstage by Mayors Tom Roach of White Plains and Richard “Fritz” Falanca of Port Chester.
In Peekskill, developer Louie Lanza — who owns in excess of 20 properties in the city, including the six-restaurant Hudson Hospitality Group — is spearheading a QOF “to allow other investors to participate and benefit from our experience in Peekskill and be part of the revitalization of this great city. We don’t have a target size for the fund established yet,” he says, “but we anticipate it being somewhere in the eight-figure range.”