CITY COMMISSION AGENDA ITEM

Department:	City Manager’s Office		Commission Meeting Date:  May 14, 2019
Staff Contact:	Diane Stoddard, Assistant City Manager
Recommendations/Options/Action Requested:
Approve submitting correspondence to the U.S. Department of Treasury relaying comments from the City of Lawrence regarding reporting requirements for Opportunity Zone projects.
Executive Summary:		The City of Lawrence has two Opportunity Zones. One is a large census tract that encompasses the East Lawrence Neighborhood, Brook Creek Neighborhood, a significant portion of the Barker Neighborhood and Lawrence Venture Park/East Hills Business Park.  The other census tract encompasses the KU campus, which includes the west campus Partnership Zone, as identified in the KU Master Plan.  Within these zones, an investor can take advantage of tax incentives (deferral, reduction or elimination of capital gains) offered under the federal government’s Opportunity Zone program by re-investing capital gains into a qualified Opportunity Fund.  The first wave of guidance on the federal opportunity zones was released in October 2018.  The Lawrence Chamber sponsored a public meeting to discuss Opportunity Zones in February 2019. City staff participated in that meeting and the session was taped and is available online.  On April 17, 2019, the Treasury Department issued a second round of IRS guidelines for Opportunity Zones.  This release contains 169 pages of proposed regulations, answering several questions resulting from the first round of guidance provided last October. A key part of the newly released guidance clarifies the ”substantially all” requirements for the holding period and use of tangible business property. Concurrent with the release, the Treasury Department issued a Request for Information to get input on methodologies for data collection and investment tracking in qualified opportunity funds for measuring the effectiveness of the policy in achieving its stated goals. Lawrence Association of Neighborhood Request and Staff Response/Recommendations: On April 19, 2019, the Lawrence Association of Neighborhoods forwarded a request to the City Commission regarding Opportunity Zones. Specifically, the LAN included six recommendations for consideration.  Staff shared these recommendations with National Development Council representative Jeff Jewell, who works with the City on its economic development programs. Jeff provided a response about what the City may be able to do regarding this federal program, and its constraints.  It should be stressed that Opportunity Zones are a federal program and while the City’s zoning and building code regulations will apply to such projects, the City will have no role in approving the use of Opportunity Zone incentives for a project and in many cases may not even be aware of the use of Opportunity Zone incentive.  Several of the LAN recommendations relate to the how Opportunity Zone investments are made within zones, or monitoring, and outcomes about such investments. Again, because this is a federal program, the City has really no ability to influence these items based on the rules released to date. However, with regard to LAN’s recommendations, staff would suggest that the City could take advantage of the Treasury Department’s Request for Information process to request that outcome data include the number of jobs, wages, number of dedicated affordable housing units created or preserved (60 percent of area median income or less) and investments in minority/disadvantaged/women-owned businesses, as suggested by LAN.  Additionally, the City may wish to comment that cities should be notified when Opportunity Zone investments are made within its city limits and also be provided access to the outcome data collected.  The proposed correspondence includes the LAN suggests and statement that cities should receive notification of Opportunity Zone projects.  Approval of the proposed comments will allow submittal by the Treasury Department's deadline.
Strategic Plan Critical Success Factor		Effective Governance/Professional Administration Economic Growth and Security
Fiscal Impact (Amount/Source):		There is no fiscal impact.
Attachments:		Proposed Correspondence

Reviewed By: (for CMO use only)

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