U.S. Sen. Tim Scott explains what is an Opportunity Zone
When the federal government created Opportunity Zones as part of the Tax Cuts and Jobs Act in 2017, lawmakers hoped the tax breaks it offered would ignite proactive initiatives in struggling communities that would create jobs, diversify the economy and help provide a living wage for hundreds of workers.
Those who wrote the bill, including U.S. Sen. Tim Scott of South Carolina, never intended for it to become an incentive to displace successful, job-producing small businesses in exchange for passive investments that benefit only a few. But that may be happening on Hilton Head Island.
The Island Packet has reported the case of a building owner converting space occupied by 13 to 15 job-creating small businesses into more storage units.
Because the site on Mathews Drive is located within a federally-designated Opportunity Zone, the owner could boost profits by claiming tax breaks that are available under the federal law, apparently without producing any new jobs. In fact, it appears jobs are being lost.
If this is indeed their plan, it would go against the very reason Opportunity Zones were created.
Opportunity Zones are an economic development tool designed to spur job creation in distressed communities as designated by state governors. The law allows tax-deferred reinvestment of capital gains through a Qualified Opportunity Fund. The zones are intended to jump-start economic development and entrepreneurship, stimulating the flow of investment into communities that need it most. Investments would finance local start-ups, build small businesses or develop properties.
In most cases, Opportunity Zones are fertile ground for job growth. Nationally, the nearly 8,000 designated zones in the U.S. already contain 24 million jobs and 1.6 million places of business, according to the Economic Innovation Group, an advocacy group dedicated to empowering entrepreneurs. If investors in every one of these zones took the same approach that Hilton Head could be experiencing, the number of jobs would shrink, not grow, as the law intends. Its worthy purpose would be defeated.
Contrast this to what is happening in Columbia where, after 11 years of abandonment, the Capital 8 theater has been brought back to life in a 23-acre strip mall complex that was designated as an Opportunity Zone. The project was a joint venture of the Meeting Place Church of Greater Columbia and Spotlight Cinemas. The eight-screen movie theater is showing first-run movies, entertaining the community and providing new jobs for ticket sellers, concessions, janitorial and other workers.
In February, Vice President Mike Pence stood with Senator Scott in Columbia and praised the economic development boost the theater has created.
“It’s creating jobs and opportunity and energy in this growing community,” Pence said. “Opportunity Zones help address unique needs by forming partnerships between the federal government with regard to tax benefits, state and local leaders, and local investors to create that incentive that makes it even more possible for people to invest at the point of the need.”
Bishop Eric J. Freeman, the church’s pastor, echoed the vice president’s pro-job sentiment. “We look forward to more businesses finding a home in our complex and bringing a robust center for family-friendly fun, entertainment and worship to the local community,” he said.
This is a tale of two cities — Hilton Head and Columbia. Like the rest of the country, both are experiencing growing pains as the recently enacted Opportunity Zone concept takes root. Going forward, may jobs win.