California Opportunity Zones Update #1 (10/22/2018)

The first Cal OpZone e-newsletter was released to site sign-ups today, with updates on the new Treasury rules, new resources for local communities to get ready for OpZone investments and a list of upcoming roundtables and webinairs.


Newsletter text:

Thank you for your recent interest in California Opportunity Zones.
Here are a few updates:

  1. Treasury Rules Released for Comment
  2. Local Efforts to Get Ready
  3. What Investors Want
  4. Upcoming Meetings and Roundtables

  1. Treasury Rules Released for Comment
    The Administration released its proposed rules on Friday.
    More information can be found on the U.S. Treasury web site here:
    https://home.treasury.gov/news/press-releases/sm530
    Quick take on the 74-page release: The proposed rule is very broad – all types of capital gains and individuals, partnerships and corporations will be eligible. The proposed rule also addresses a big issue about the ten year holding period by proposing to allow Opportunity Zone investments to get the full 10-year tax benefit so long as they are made by June 2027 – not by 12/31/2018. If approved, this extension would have a huge impact on investment scale and give California communities much more time to get ready. We will be aiming to work with other states where possible to comment on a bi-partisan basis to maximize the impact of our comments for program improvements and clarifications. Please feel free to send your comments and concerns using our site’s Ask the Wizard comment tool:
    https://opzones.ca.gov/faqs/
  2. Local Efforts to Get Ready for OZs
    1. A critical step for communities interested in attracting possible Opportunity Zone investment is the development of an investable pipeline of projects. In addition to our existing Get Ready Guide on the state Op Zones site, we would also point you to this useful new paper developed for Accelerator for America:
      https://drexel.edu/lindyinstitute/initiatives/nowak-metro-finance-lab/publications/reports/opportunity-zones/
    2. The City of Erie has also released a local prospectus which is worth reviewing as well:
      http://acceleratorforamerica.org/media/2018-10-09/mayor-joe-schember-build-opportunity-restore-hope-transform-erie
    3. Local governments should also consider steps to incentivize local development that is 100% compatible with community goals through zoning and other ordinance changes. One useful resource for these efforts is the Local Government Commission. LGC can help local governments do that through a variety of services designed to assist local elected officials, their staff, and other dedicated community leaders in creating healthy, walkable, and resource-efficient communities through community workshops, plan development, funding navigation and identifying zoning and ordinance changes.
  3. What Investors Want
    While developing their pipeline of investable projects, local communities should also be mindful of what investors want – and what they should ask for from interested investors.
    Here are a few links on that topic:

    1. The Kresge and Rockefeller Foundations asked 141 fund managers looking at Opportunity Zones what they think: Key takeaways are here:
      https://kresge.org/content/mission-money-markets-6-takeaways-opportunity-zones-lois
    2. Investors are also interested in permitting speed. On that, be sure to familiarize yourself with the types of projects — including infill housing, water facilities, school facilities and health facilities — which may qualify for accelerated permitting under the state’s CEQA procedures. Learn more by reviewing technical advisories here:
      http://opr.ca.gov/docs/20180606-Tech_Advisory_CEQA_Exemptions.pdf
      http://opr.ca.gov/docs/20181010-TechAdvisory-Review_of_Housing_Exemptions.pdf
      http://opr.ca.gov/docs/20171206-Exemptions_Tech_Advisory_Dec_2017.pdf
    3. What should you ask investors when you meet with them? Ask them to provide a “term sheet” about what types of projects and returns they are looking for. See pages 34-35 of this document for an example of an “equity” term sheet:
      https://www.calpers.ca.gov/docs/forms-publications/infrastructure-investment-outreach.pdf
    4. Here is the draft new IRS form for Opportunity Zone investors:
      https://www.irs.gov/pub/irs-dft/i8996–dft.pdf
  4. Upcoming OZ Meetings and Community Roundtables
    • CalEd Op Zone webinair (November 7)
    • Bay Area Council/CDFA event (November 13)
    • Bishop OZ Roundtable (November 2018 TBD)
    • CA Forward Economic Summit (November 15-16)
    • Valley Vision (November TBD)
    • California Op Zones Investor Summit (March 2019)

    Have an event that we should know about and post to the site?
    Let us know: https://opzones.ca.gov/calendar/