Spokane Journal of Business

Zoning in on economic development opportunity in Spokane

Eleven tracts here chosen for new federal incentive

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-—State of Washington Department of Commerce
This map highlights the 11 eligible census tracts in Spokane County designated by the Department of Commerce as “Opportunity Zones”.

Eleven U.S. Census Bureau tracts in Spokane County have been selected as Opportunity Zones, in which investors can earn federal tax breaks and potentially bring further economic development to the region.

The neighborhoods here are among 139 census tracts in 36 counties statewide that Gov. Jay Inslee has approved for the new Opportunity Zone program, which was established as part of the federal 2017 Tax Cuts and Jobs Act.

Through the federal program, governors from each state were allowed to designate up to 25 percent of eligible census tracts as opportunity zones. Investments made through special funds, called Opportunity Funds, in these zones will be able to defer or eliminate federal income taxes on capital gains.

The Opportunity Zones designated for Spokane County include Airway Heights and census tracts within Spokane’s downtown core, as well as the West Central, East Sprague Avenue, lower South Hill, and Hillyard neighborhoods. 

Robin Toth, GSI’s vice president of business development, describes the Opportunity Zone program as a community investment program designed to connect private capital with low-income census tracts in communities nationwide. 

In Spokane County, the estimated dollar value of shovel-ready projects GSI lists within all 11 Opportunity Zones totals about $376.3 million. 

Toth says, “GSI hasn’t had the opportunity to compile data on just how much these completed projects could potentially return to the community in terms of economic impact, but it appears to be pretty significant.”

Now that those tracts of land have been designated as Opportunity Zones, Toth says GSI is waiting to hear more from the federal government about the rules for Opportunity Funds.

She says funds are investment vehicles organized as corporations or partnerships for the purpose of investing in property within Opportunity Zones. Those funds are required to invest 90 percent or more of their resources into projects in the zones.

“Investors would be able to defer paying taxes on capital gains that are invested in qualified Opportunity Funds, thereby incentivizing development in Opportunity Zones,” she says.

Toth says detailed legislation on how to establish such funds, as well as any requirements or restrictions relating to their use, is still forthcoming.

In Spokane, she says, “We have a good variety of unique projects proposed, within these zones including residential, commercial, retail, and mixed-use ideas. We’re hopeful the federal government will pass along rules for Opportunity Funds soon, so that investors will be able to garner those investments, and set up funds, so that more of these shovel-ready projects can start.”

Although GSI hasn’t yet heard from any investment groups that are interested specifically in investing in the Opportunity Zone program, Toth says there are several at both the state and local levels that would be capable of doing so.

“Once those rules are in place it will be easier for investors to choose whether they’d like to participate and how best to do so,” she says. “It’s a strong program in theory, and we’re excited to see it in practice.”

Toby Broemmeling, executive director for the West Plains Chamber of Commerce, says he first heard about the Opportunity Zone program last January and has been working to stay informed about it since.

“The West Plains Chamber is involved in economic development, and because this program represents so much potential for that, it’s something we’re paying attention to,” he says. “We’re excited to be a part of the program, and to start learning more about how to navigate and use it.”

The Airway Heights census tract is centrally located, between Fairchild Air Force Base on the west, and Spokane International Airport to the southeast.

Broemmeling says he sees the program as having the potential to add interest to current as well as future projects being developed within the Airway Heights area.

“The program highlights the fact that there’s already some interest in economic development here,” he says. “It adds to that interest and puts our census tract in a favorable light for future investment.”

He says the program is still new enough that officials within each designated zone are still learning more about how it works.

“I think we’re all still discovering what it means to be an Opportunity Zone, and what we can do within it,” he says. “Some of the specifics are still a bit vague, but it’s certainly created a lot of buzz around the potential in our area.”

According to the Department of Commerce, to qualify for Opportunity Zone status, a census tract must have an individual poverty rate of at least 20 percent and family income at less than 80 percent of the community’s median family income.  

A total of 555 census tracts in Washington met the eligibility criteria, though only 139 could receive the designation.

Initially, Toth says, only five Spokane County census tracts were going to be Opportunity Zones. 

“Over period of several weeks, GSI worked with the Department of Commerce and our municipal partners throughout Spokane County to collect information and submit applications designating a number of Spokane County low-income census tracts as opportunity zones,” she says.

“Based on population, there were initially five tracts set aside for Spokane County, four within the city and one in Airway Heights. We worked with local municipalities and submitted applications and a letter of support for each one.” 

Toth says as part of the application process for designating opportunity zones, applications had to list shovel-ready projects for potential funding within each zone.

“We saw between 30 and 40 different projects pitched for this, and we’re hoping that the majority of those will at least have generated new interest even if they’re ultimately not selected for funding,” she says.

Toth says the city of Spokane tracts submitted for the initial opportunity zone designation process include one covering the South University District/East Sprague area, one focused on downtown’s Central Business District, and two census tracts in the West Central neighborhood that include residential, retail, and commercial projects as well as affordable and market-rate housing.

She says the fifth low-income census tract was submitted by the city of Airway Heights and includes that entire city as well as Kalispel and Spokane tribal trust lands.

Following the initial round of zone designations, Toth says the application process was opened up for additional recommendations, with the city of Spokane submitting nine more tracts for designation and receiving approval for six of them.

Those six designated tracts include three census tracts located in the Hillyard area of northeast Spokane called The Yard, and three census tracts on the lower South Hill, which includes Spokane’s medical district.

“At the end of the day, there are 11 designated opportunity zones in Spokane County, most of which are centered within the core urban areas,” she says. “GSI and its partners believe this program has the potential to provide an accelerant to development in those areas.”

Some current projects underway in Opportunity Zones include the University District Gateway Bridge, the Playfair Commerce Park, the Riverbend development, and the Ridpath Hotel conversion.

Toth says many of those projects already have begun construction and have funding available toward completion but serve as examples of economic development investments already taking place in those zones. 

 “The public infrastructure investments that have been made make these new Opportunity Zones more attractive for the future private investments that will be accelerated by this new federal program,” she says. 

LeAnn Bjerken
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Reporter LeAnn Bjerken covers health care at the Journal of Business. A Minnesota native and cat lover, she enjoys beachside vacations and writing poetry. LeAnn has worked for the Journal since 2015.

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