New Opportunity Zones? The Rust to Revitalization Act

The Opportunity Zone program has been a major factor in spurring development in left-behind, impoverished census tracts throughout the US. Many of these areas are in a distressed state due to economic change, where shifts in industrial manufacturing have left shuttered factories and impoverished communities in their wake. However, a new bill is in congress to extend the Opportunity Zones (OZ) program to include these industrial sites.

The Rust to Revitalization Act

The Rust to Revitalization Act, co-sponsored by democratic representatives Dan Kildee from Michigan and Dutch Ruppersberger from Maryland, would amend the IRS code of 1986 and provide a special rule to grant Opportunity Zone status to former industrial sites contiguous to census tracts already designated as Opportunity Zones. These shuttered industrial sites, often contaminated former steel-making or automotive plants, are coined ‘brownfields’ and have not already been designated for OZ tax benefits because no one lives there. They are considered to be zero-population. However, their proximity to distressed communities makes their redevelopment critical to the success of the new developments in the adjacent OZ tracts. This legislation would apply nationally, and Ruppersberger estimates that as many as 100 sites around the country could benefit if it is passed into law. Let’s look at how The Rust to Revitalization Act could bring a boom to the Turner Station neighborhood in Maryland and the former Buick City site in Michigan. 

For Turner Station, “It means jobs.”

Turner Station is a historically black neighborhood in Baltimore County that has been experiencing decline since the closure of Bethlehem Steel, a massive steel manufacturing facility that sits on 3,000 acres and once provided thousands of jobs to the area. Turner Station is designated as an Opportunity Zone, but the massive former site of the steel plant does not currently qualify for OZ tax benefits as it has a zero-population. 

Tradepoint Atlantic, a global shipping center, is already working on decontaminating and repurposing the old industrial site. FedEx, Amazon, Volkswagen and BMW are already using the repurposed areas, and United Safety Technology has recently announced their intent to bring an additional 2,000 jobs to the area by setting up a factory to manufacture medical exam gloves. However, the site still has hundreds of acres left to decontaminate and develop, and OZ benefits would be a major incentive to bring private equity in to continue development. Tradepoint executives estimate that finishing the development would require about $1B in additional investment. 

Michael Thompson, a community leader in Turner Station says, “For us, it means jobs, and jobs mean money. Money means a future. The investment in that community over there, that means homeowners, housing, more recreation, better education, and by all, opportunity.” With investment spurred by Opportunity Zone benefits, Tradepoint Atlantic believes 10,000 additional jobs could be created.

Potential Impacts for Buick City

Flint, Michigan is a city best known to most Americans for its battle with water contamination due to decaying infrastructure. Flint is the home to a site called Buick City, a former automotive manufacturing facility  that General Motors used throughout the 1900s to manufacture transmission and engine components until its closure in 2010. Currently, the Revitalizing Auto Communities Environmental Response (RACER) Trust owns Buick City and they are working on the environmental cleanup necessary to redevelop the 413-acre site. 

“Thank you, congressman Kildee, for introducing legislation to correct the oversight in the Opportunity Zones program so that brownfields like Buick City can benefit from economic development incentives. Flint has a real opportunity to turn Buick City into a place that serves environmental justice– putting Flint on the map for something needed now and in the future, like manufacturing solar panels or electric vehicles, while minimizing environmental impacts on surrounding neighborhoods.”  Said Mona Munroe-Younis, Executive Director of the Environmental Transformation Movement of Flint. 

Endorsement from EIG

The Economic Innovation Group (EIG) is a bipartisan public policy organization dedicated to forging a more dynamic and inclusive American economy. Headquartered in Washington, DC, EIG produces nationally-recognized research and works with policymakers to develop ideas that empower workers, entrepreneurs and communities. EIG is endorsing The Rust to Revitalization Act, which lends legitimacy to the economic viability of the investments. Scott Shewcraft, EIG’s Vice President of Policy, issued this statement: “Many low-income communities are home to industrial brownfield sites that have become visible signs of decay within their communities. This legislation would expand the reach of the OZ incentive so that those areas can be transformed to once again serve as anchors of economic activity. EIG welcomes this and other bipartisan efforts to build upon and enhance the original Opportunity Zones legislation in ways that improve economic well-being for overlooked communities nationwide.”

Have you experienced a capital gain? Do you expect one in the near future? Get in touch with us today and get connected to the right Qualified Opportunity Funds to fit your needs.