Gov. Asa Hutchinson designated three Census tracts intersecting at Central Avenue and Reserve Street as Opportunity Zones Monday, incentivizing capital sitting idle on corporate balance sheets to be invested downtown.
Included in last year's Tax Cuts and Jobs Act, Opportunity Zones are the tax code's newest incentive for spurring private investment in developing urban and rural areas. Tracts designated in Garland County comprise the Central, Whittington and Park corridors, making investments in the Arlington Resort Hotel & Spa and Majestic Hotel property Hot Springs purchased in 2015 eligible for incentives.
"This is an exciting day for Hot Springs," Hutchinson told The Sentinel-Record. "It's important for historic preservation and economic development in that area. It should encourage investment in those areas."
Cole McCaskill, vice president of economic development for the Hot Springs Metro Partnership, a public-private nonprofit economic development corporation, said the three tracts Hutchinson selected ranked one, two and four on the six-tract list the partnership developed with the city.
The tract east of upper Central Avenue and north of Reserve Street ranked first. According to Census information, it has a poverty rate of more than 40 percent. A minimum poverty rate of 20 percent is one of the criteria qualifying a tract for the program.
It includes the Arlington, a property looking to attract capital for the $30 million renovation it announced last year. Jim Fram, vice president of development for the renovation project, said Monday that investment enabled by the designation could be a critical piece of the project's financing.
The incentive defers federal tax liabilities on unrealized capital gains invested in Opportunity Zones. Purchasing stock in an Opportunity Zone enterprise or real estate there is an investment eligible for the incentive. In addition to the temporary deferral on capital gains, profits generated from an incentive-eligible investment made for 10 years or more in an Opportunity Zone are exempt from the 23.8 percent capital gain and net investment income tax.
"This is great news," Fram said. "This is just one of several tools we're going to be looking at when we put the capital together for restoring or renovating the hotel. We're looking to see if we want to partner with one of the major franchises. There's a lot of possibilities. We're negotiating with one now. We hope to be able to announce something fairly soon."
The Majestic Hotel property is in the tract west of upper Central Avenue that includes the Whittington Avenue corridor and parts of Quapaw and Ouachita avenues. McCaskill said it ranked second on the partnership and city's prioritized list. According to Census data, its poverty rate is more than 35 percent.
The city has spent about $2 million acquiring the property and demolishing condemned structures on it. It's working with regulators on a liability release for contamination that occurred prior to the city acquiring the property in September 2015.
The third tract Hutchinson designated includes the East Grand Avenue corridor from Central to Malvern avenues and Central from Reserve Street in the north to Orange Street in the south. According to Census data, it has almost a 40-percent poverty rate and includes the Belding Street property formerly owned by the Boys & Girls Club of Hot Springs. It ranked fourth on the list submitted to the governor.
McCaskill said the tract that includes Pleasant Street and the Gateway Neighborhood between Malvern and East Grand avenues ranked third on the list. The Garland, Greenwood and Hobson avenue area west of Central ranked fifth and the Central corridor north from Lake Hamilton to Winona Street ranked sixth.
McCaskill said tracts with the most investment potential were given priority.
"We looked at all the low-income Census tracts and all the low-income adjacent Census tracts that qualify as Opportunity Zones," he said. "We thought with all the investment interest in downtown and the downtown area, those in the core and right around the core of downtown would be a huge priority in our mind."
The program allows governors to nominate 25 percent of their state's eligible tracts. Arkansas has 337.
"With three in Hot Springs, it makes Garland County, on a proportionate basis, one of the most successful counties in terms of designations," Hutchinson said.
Local on 04/24/2018