City of Somerville
Massachusetts

Agenda Item
206896
Kept in Committee
Feb 11, 2019 6:00 PM

That the Administration explain to this Board, in writing, how the recently-released US Treasury “Opportunity Zone” tax breaks will apply to the Union Square redevelopment, and whether this is expected to significantly increase the profit for the Union Square Master Developer.

Information

Department:City CouncilSponsors:Ward Three City Councilor Ben Ewen-Campen, j and the Entire Board
Category:ResolutionPurposes:Resolution

Attachments

  1. Wall St Journal Article

Official Text

That the Administration explain to this Board, in writing, how the recently-released U.S. Treasury “Opportunity Zone” tax breaks will apply to the Union Square redevelopment, and whether this is expected to significantly increase the profit for the Union Square Master Developer.

 

Meeting History

Oct 23, 2018 7:00 PM Video City Council Regular Meeting

Alderman Ewen-Campen stated that several large parts of Somerville are included in new federally-designated "Opportunity Zones," including the D2 parcel in Union Sq. He said this could significantly enhance the bottom line for investors, and he would like the Administration to comment on possible impacts.

RESULT:APPROVED
Dec 11, 2018 6:00 PM Video Finance Committee Committee of the Whole

Alderman Ewen-Campen was the primary sponsor and he submitted four articles that discussed the implications of the tax code change and the substantial tax benefits to investors that could result from the change in law. Mr. Galligani described the process that Somerville followed. The State asked the City to designate 2 census tracks for identification as opportunity zones. The City initially looked at 7 census tracks and then narrowed it down to 2. The two opportunities zones encompass Assembly Square and the Ten Hills section to the Mystic River and Mystic Ave. and part of Union Square to Prospect St./Webster Ave. to Washington St. into Inner Belt and Boynton Yards. When asked by the Chair as why he had not submitted a written response as asked by the Order, Mr. Galligani said that at this point there was not much in the way of substantive analysis that he was able to locate. As a result, Mr. Galligani was unable to respond to specific questions about the tax benefits that could flow to developers in Somerville. In response to a request by Ald. Niedergang, Mr. Galligani stated he would provide the Boar with a written response with more detail by the end of January. Chair White recommended that Mr. Galligani consult with the tax department of outside law firms that represent the City to see if they had prepared any analysis. Chair White stated that it likely was early in process in that the Internal Revenue Service had to enact regulations under the tax code to implement the law. Ald. Rossetti asked why the BOA was not informed about this program. The general consensus of the Committee was that if developers are going to receive additional tax benefits then the City should benefit by receiving additional benefits from developers.

RESULT:KEPT IN COMMITTEE
Feb 11, 2019 6:00 PM Video Finance Committee Committee Meeting

Mr. Galligani provided a slide presentation on Opportunity Zone (“OZ”) Update which will be posted on the city’s website. The slide presentation consisted of: Timelines, Zone Basics, Structure, Tax Benefits (most important), reinvested capital gain, and community strategies. Mr. Galligani stated that the biggest challenge for the City in utilizing the OZ benefits is how to benefit the community and provide value for investors. OZ will help developers attract more competitive capital to help finance development projects. The chair asked Mr. Galligani to identify specific parcels that could benefit from OZ. He replied that Boynton Yards, Ten Hills, Twin City Plaza, Brickbottom, Inner Belt and Assembly Square could benefit for OZ. The chair asked Mr. Galligani to work with Mr. Proakis to show on a map the possible areas in the City that could benefit from the OZ opportunity. Mr. Galligani informed the Committee that under the OZ law, there was no requirement for developers using OZ benefits to inform the City. Chair White asked Mr. Galligani to consult with George Proakis about including in the City’s proposed zoning a provision that developers seeking a special permit that are using OZ to fund the project, provide information on OZ funding as part of the application project. Because the Target site is included in an OZ area, Chair White asked Mr. Mr. Galligani if he had seen or discussed with the owners of the Target when the Target lease expired, because the Target site had great potential for transit oriented development. The chair asked that any information with regard to the lease be communicated to the City Council. The Chair stated that he would schedule the item for further discussion in two months as it it likely that the internal revenue service regulations on OZs should be finalized, which would provide further information on how OZs would operate.

RESULT:KEPT IN COMMITTEE