Business

Opportunity Zones in Montrose

What, exactly, is an “Opportunity Zone”?

It’s an economic plan that was adopted by the federal government in 2017, as part of the 2017 Tax and Jobs Act. It was created by a team of government officials and private entrepreneurs, including one of the founding investors in Facebook.

“It was designed to put money into some of the distressed areas that may never have seen recovery from the recession we had in 2008,” according to Chelsea Rosty, Director of Business Innovation for the City of Montrose. The Great Recession began in December, 2007 and gradually declined through 2010. Some parts of the country, and the world, still haven’t fully recovered.

Rosty recently told The Forum at CASA that “Fortunately, in Monrose, things are moving and we look like we’re in a good place. But, compared to some other parts of the country, we’re still a little distressed.”

The basic idea behind the Opportunity Zones is to incentivize billionaires and millionaires to invest in distressed areas. “The incentive is to give a deferral, reduction, or elimination of certain capital gains taxes,” Rosty explained. Investors would be required to start with one million dollars’ worth of capital gains.

“For ten years, those taxes would be deferred as part of the program,” she continued. Rosty explained the details by putting herself in a potential investor’s shoes. “Now, the program requires that I put more into the program and double its value, so there’s the second million dollars. So, we’re making a good project even better.” And, after the first 10 years, the investment would be doubled.

“At the 11th year, I could sell; but if the market turns out to be favorable, I get to sell for $3 million. The beautiful gravy of the program is now that I’ve made, essentially, two million dollars on the project, I don’t have to pay taxes on any of that $2 million, and now, on my original million, I only have to pay 15 percent of the taxes.” The bottom line is that the taxes paid on that investment or development would be considerably lower than usual.

The original one million dollars of capital gains could come from any source that would normally be taxed that way, e.g. selling your house. The taxpayer who realizes the capital gain must invest it within an Opportunity Zone within 180 days. Rosty explained why that particular rule is good for communities. “This is a fast-moving program; we want that economic investment soon. We want things to happen. So, they must invest it into a qualified opportunity fund.

“Anybody can set up a qualified opportunity fund,” she explained. “It’s a single piece of paper that you have to fill out with your taxes, and that’s it.”

Opportunity Zone investments must happen in a “designated low-income census tract”, Rosty said. “We have several of them here in Montrose.” It can be all, or part, of a business or piece of property. “And, it has to happen within six months,” she explained.

The next step was what and where to build. “Our downtown is super important. So that’s already part of the census tract.

“And we have this new development along the Uncompahgre River, called Colorado Outdoors, so it’s really good that that’s included.

“And how about the airport? That’s really important,too.

“And the County built a new Events Center in part of this census tract. This particular census tract, which was picked up by  the state government and the federal government, was a huge win for us,” Rosty explained with her usual enthusiasm. “We are really fortunate on that.”

Forbes Magazine published an article which mentioned Montrose in August of 2018. According to Rosty, it came about when the writer passed through Montrose on his way to visit friends in Telluride. He’d been thinking that he should include rural opportunity zones in his piece, and realized that Montrose might be a good example. “He looked it up, and realized that we were an Opportunity Zone,” Rosty said with a smile.

While the article certainly helped, there was still a considerable amount of work left to do by local officials. The magazine piece “quite literally put us on the map, but that’s when investors started calling,” she said, “wanting to learn more about our community.”

Rosty says the state government has been exceptionally helpful to Montrose’s Opportunity Zones. “Lucky for us, Colorado is really in front of this. The governor’s office has a department of Opportunity Zones, with a director and staff who are just specifically working on this, i.e educating communities and making sure that we are taking this on intelligently.”

Rosty is a Grand Junction native. She is also a graduate of the University of Wyoming, and studied Marketing and Economics while serving on the rodeo team.

About the author

Dave Segal

Dave Segal

Dave Segal, a Detroit native, has been a journalist since 1977. He has worked as a reporter, commentator, and news director at radio stations in Detroit, Denver, and Montrose.

Dave has been writing and editing for the Monitor since its first print issue in 2003. He is editor and senior writer for the digital magazine. On the side, Dave has also done freelance writing, media relations, and a variety of volunteer work.