Economic designation a potential opportunity for Wrangell

Wrangell was last week granted a special economic designation by the state along with 24 other Alaskan communities.

The Department of Commerce, Community & Economic Development named the community as one of its new "opportunity zones," part of a federal program designed to drive long-term capital investment to economically distressed communities.

According to the federal Treasury Department, Alaska has 60 low-income communities eligible for the designation. With the creation of the Opportunity Zone program in December, the state could nominate up to 25 of these for inclusion. To winnow down the field, the DCCED took into consideration geography, project feasibility, existing initiatives and community support in addition to economic hardship.

Wrangell economic development director Carol Rushmore said a pitch on behalf of the city had been submitted earlier this month, at the general invitation of Gov. Bill Walker. Wrangell was one of five communities in Southeast subsequently chosen for the program, including Hoonah & Angoon, Haines, most of Prince of Wales, and Metlakatla.

"It's a positive," Rushmore commented. "It would allow some businesses that may want to invest in Wrangell to receive some tax benefits from it."

The Opportunity Zones program was a creation of the Tax Cuts and Jobs Act signed in December. Before being adopted in the tax package, it was developed in 2015 by a bipartisan Washington D.C. think tank, the Economic Innovation Group.

EIG's research found that 52.3 million Americans – one in six – live in economically distressed communities. These areas typically have trouble attracting the capital needed to sustain economic opportunity for their residents. According to EIG, more than half of these areas contained both fewer jobs and businesses in 2015 than they did in 2000.

Despite recovery efforts taken on following the recession a decade ago, these distressed communities saw on average a six-percent decline in the number of local businesses in the years since. Meanwhile, the group contends the national economy is becoming increasingly dependent on metropolitan areas, with just five of these producing as many new businesses as the rest of the country between 2010 and 2014.

To counteract these trends, DCCED explained the Opportunity Zones program would provide tax incentives to corporate and individual investors who put their capital to work in participating low-income communities. Investors could receive a temporary deferral for capital gains reinvested in a designated opportunity fund, a step-up in basis for reinvested capital gains if the investment is held for at least five years, and a permanent exclusion from taxable income of capital gains made in the opportunity fund.

A qualified opportunity fund would be any investment vehicle organized as a corporation or partnership, with the specific purpose of investing in Opportunity Zone program assets. The fund must hold at least 90 percent of its assets in a qualifying property to be included for perks.

"The devil, of course, is in the details of what it means for each business," said Rushmore.

For Wrangell, she was hopeful the program's incentives could encourage development, such as the privately-held mill or city's former Institute properties, or the planned Stikine Inn expansion. In its release, DCCED encouraged potential investors to consult a tax professional to determine how they might be able to benefit from the Opportunity Zones program.