Opinion: Boulder opportunity zone means tax breaks for the rich


According to the IRS, “Opportunity Zones are an economic development tool — that is, they are designed to spur economic development and job creation in distressed communities.” This concept was part of the 2017 Republican tax cut bill. About 8,700 census tracts have been approved as opportunity zones across the country.
Boulder’s opportunity zone was selected by the governor’s Office of Economic Development and our city government employees without consulting the City Council or the citizens. This census tract is about 2.5 square miles, and encompasses the area between 28th and 55th Streets, and from Arapahoe Road to Iris Avenue, with a notch cut out by Valmont and Airport roads. This “distressed community” includes the new Google office buildings, the 29th Street Mall and Boulder Junction. Obviously, this choice was not about helping the disadvantaged; it was about getting investors to dump yet more money into Boulder, plain and simple.(Diagonal Plaza is the only part of the opportunity zone that anyone has even argued needs help; but it is a tiny part, and the issue there is diffuse ownership, not money.)
Here’s the IRS jargon describing the financial benefits to investors: “If the investor holds the investment in the Opportunity Fund for at least ten years, the investor is eligible for an increase in basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged.” In other words, if you stay in for 10 years, you pay no 20 percent federal capital gains tax on the sale. Also, “Investors can defer tax on any prior gains invested in a Qualified Opportunity Fund (QOF) until the earlier of the date on which the investment in a QOF is sold or exchanged, or December 31, 2026. If the QOF investment is held for longer than 5 years, there is a 10% exclusion of the deferred gain. If held for more than 7 years, the 10% becomes 15%.” So you can also save on the capital gains tax on your previous investment.
A quick calculation shows that, properly structured, investing in an opportunity zone could multiply the return on your investment. As one developer said in the Oct. 23 Wall Street Journal, “This was a jackpot.” So investors will look for the most reliable and profitable deals, i.e. solid projects in high growth areas. This increased demand will cause property prices to shoot up even faster. And this will divert money from truly distressed communities that actually need help.
In the now old-fashioned “urban renewal” process, the local government decided if an area was “blighted,” and if so gave projects relief from incremental tax increases. But in opportunity zones, local governments have no say, so any community benefits will be accidental. The real beneficiaries in places like Boulder are those who have money to invest and then can avoid paying taxes on their profits. By the way, we’ll never know who is taking advantage of this, because the evidence is hidden in people’s tax returns; no public records exist. Also, investments must go through a “Qualified Opportunity Fund.” But the entities that create these (investment funds, big developers, etc.) are generally not interested in small investors, so the tax benefit will go to those who really don’t need them.
Opportunity zones decrease revenue to the federal government and so increase our national debt, now at the highest debt-to-GDP ratio since the end of World War II. Of course opportunity zones are not the only such scam. In June, our city government was involved with the Colorado Economic Development Commission’s approval of $2.9 million worth of state tax breaks — over $10,000 per employee — so that a German fitness equipment maker would locate in Boulder.
Approval of this absurd Boulder opportunity zone really accentuates the need to revise how much and what type of new building we allow in the opportunity zone, and what they should contribute to the community, before the whole area is over-developed, housing prices shoot up further, and traffic deadlocks.
Because we have no control over the use of the opportunity zone tax breaks, we’ll have to do some serious re-zoning and do it fast. A case in point is the recently proposed conversion of Macy’s in 29th Street to 150,000 square feet of office space, using the opportunity zone mechanism. Boulder does not need more jobs.
The city council should also require the city manager to immediately release all communications and analyses related to this totally opaque process. We citizens deserve to know how all this occurred without our being fully informed and properly included.


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