The prospect of opportunity zones has generated excitement over the last year, but some developers, funds and communities aren’t sure how to leverage the new tax incentive program.
That’s why Kunal Merchant, a former Sacramento Kings executive and aide to former Mayor Kevin Johnson, says he’s launching CalOZ, a new group dedicated to navigating the complicated framework around opportunity zones.
Opportunity zones were written into the 2017 federal tax reform as a way give major tax incentives for development and investment in areas that have been previously overlooked by private investment. The areas are determined by census tract.
Among Sacramento County’s 43 opportunity zones are tracts that cover the Railyards development, parts of downtown Sacramento, northern Rancho Cordova and swaths of land near North Sacramento and Florin Road. CalOZ will spread its focus across California, which has about 10 percent of all 8,700 of the nation’s opportunity zones.
Merchant is a former vice president of strategic initiatives with the Kings and was chief of staff to Johnson. Working on the front lines for projects like Golden 1 Center and the Sacramento Republic’s plans to build a Major League Soccer stadium at the Railyards, Merchant said he’s seen firsthand how public-private partnerships can create “catalytic” projects for a city.
“Sacramento and the Railyards can be a real model for what’s possible with opportunity zones,” Merchant said.
Through CalOZ, Merchant said he hopes to help communities bring such economic development to areas where it’s needed. The tax incentive requires investors and developers to move quickly, as those trying to leverage opportunity funds need to invest their capital gains from an opportunity site within 180 days of a sale. At the same time, those funds need to be invested into a qualified opportunity zone fund, according to the IRS.
Adding to that balancing act are local development policies and oversight, Merchant said.
“Every day that goes by, the clock is ticking on an opportunity zone project,” Merchant said. “We really want to make the California market really successful and something that communities around the state can grow from.”
The group’s early projects will focus on shaping local and state policies. Beyond that, CalOZ is starting up a fellowship program to provide training for community leaders and those interested in deploying into different cities to help navigate the opportunity zone program, Merchant said.
CalOZ is a small group, with about half a dozen employees. Its larger strength, Merchant said, is in the partnerships it’s building. The group currently has partnerships with the Sacramento Promise Zone, Bay Area Council, California Business Roundtable and about a dozen others, according to its website.