Communities in every state are scrambling to redevelop economically disadvantaged areas or opportunity zones under a new federal tax break approved in late 2017. But the city of Boulder has gone the other way, putting a moratorium on projects in its zone and largely blocking developers from taking part in what is a limited-time offer.
“We are a quirky little town,” conceded John Tayer, president and CEO of the Boulder Chamber of Commerce, at the Opportunity Zones Denver workshop sponsored by BisNow on Wednesday morning. He said the moratorium, passed last year and lasting through June 2020, sends the wrong message to developers and investors.
Boulder’s opportunity zone stretches from 55th and 28th streets and from the Diagonal Highway and Arapahoe Avenue. It includes the Twenty Ninth Street retail development, the new Google campus, as well as some of the city’s more affordable housing areas.
Liz Hanson, president of Hanson Business Strategies, speaking alongside Tayer, said there was a concern that the incentives could accelerate development in that part of the city, racing ahead of the recently updated Boulder Valley Comprehensive Plan. There were also worries that rapid gentrification could displace some of the city’s lower-income residents if not handled right.
The City Council has crafted exemptions to the moratorium, which was passed late last year. Those placed an emphasis on affordable housing options. That shows that “Boulder isn’t closed for business,” she said. But convincing developers otherwise could prove a challenge.
Tayer notes that Boulder has long cast a skeptical eye on development of any kind. And the fact that the incentives originated out of the Trump administration as part of the 2017 Tax Cuts and Jobs Act didn’t earn them any points in Boulder, despite strong bipartisan support in Congress for opportunity zones.
“It immediately raised a bunch of red flags in our community,” Tayer said.
Opportunities zone incentives allow someone selling an asset to put the money into a Qualified Opportunity Fund, which then can be invested in real estate or a business located in a state-designated distressed area. Capital gains are deferred through the end of 2026, and the longer the holding period, the greater the reduction in taxes owed.
If Boulder makes it too difficult to invest, then developers and investors are more likely to move onto other areas.
“It isn’t an area we can just ignore for awhile,” said Hanson of Boulder’s zone. In that sense, the moratorium could become a lost opportunity in more ways than one.
States were limited in the number of opportunity zones they could designate, and Colorado carved out 126 census tracts. Boulder City Council may be making a political statement against runaway development or the Trump administration, but it is costing another Colorado community that could have made use of the tax breaks to bring in jobs. .
Stephanie Copeland, CEO of The Governance Project, was head of the Colorado Office of Economic Development and International Trade when it determined the opportunity zone boundaries. At the time, it seemed Boulder was open to having a zone and the reinvestment that would result.
Copeland, who also spoke at the workshop, suggested rather than issuing a moratorium, the city should put together a list of potential redevelopment opportunities and present them to interested funds. That’s what other communities are doing, and it helps signal that a project has buy-in from the local government, while steering development in a desired direction, she said.