Downtown Marriott rendering

Architect’s rendering shows 259-room Element and SpringHill Suites hotel now under construction in downtown Colorado Springs.

El Paso County officials are developing a plan to ensure that those living in or near an Opportunity Zone benefit from the projects built with tax breaks in economically distressed areas.

The effort led by Commissioner Stan VanderWerf aims to get the Internal Revenue Service to adopt rules that would sweeten the tax breaks in exchange for hiring those living in or near the zones.

Critics of Opportunity Zones call them a giveaway to rich investors that can end up driving out low-income residents of those areas by increasing property values and rents.

“The value is of this is hiring people who live in or near these Opportunity Zones. One of the better tools we have to lift up people who are living in economically disadvantaged or depressed areas is a job,” VanderWerf said.

“When you have a job opportunity and growth in your career, it helps make the rent or house payment and puts food on the table. This will have a nationwide benefit,” if adopted.

Colorado Springs has eight Opportunity Zones — including the downtown area and the airport and surrounding areas — where investors can delay paying federal income taxes on capital gains from investments. An eight-story hotel in downtown Colorado Springs that will carry two Marriott brands and open in 2021 as well as two hotels planned in the business park of the Colorado Springs Airport are among several projects underway, or being considered, in the local zones.

In addition to the Springs airport area and downtown, the other Oppportunity Zones are: the Cimarron Hills neighborhood; a large part of Nevada Avenue, north of Fillmore Street; the Hillside neighborhood; The Citadel mall and surrounding area; an area northeast of South Academy and Fountain boulevards; and a narrow parcel east of Interstate 25, between Circle Drive and Mesa Ridge Parkway.

In some of the Opportunity Zones, such as the airport’s business park, a hotel job could pay enough to benefit residents of the surrounding area. But, in gentrifying areas such as downtown, where a Marriott is being built, it’s unlikely hotel workers could afford rents at nearby apartments.

VanderWerf’s comments echo a speech in September in Colorado Springs by Scott Turner, executive director of the White House Opportunity and Revitalization Council, that the Opportunity Zone program included in the 2017 tax cut isn’t “just for the rich” but instead is a nonpartisan effort to promote investment and redevelopment in some of the nation’s poorest and most crime-ridden neighborhoods.

The proposed IRS rule would reduce a requirement that businesses getting investments eligible for Opportunity Zone tax breaks have 70% of their “tangible” property in a zone. That requirement would be cut to 50% if the business participates in a federal jobs program that gives job applicants that live in or near a zone on-the-job training at that business.

If the IRS won’t adopt the rule, VanderWerf said he will seek federal legislation to amend the law that created the Opportunity Zone program.

In the Colorado Springs area, the Pikes Peak Workforce Center operates such a program and is gearing up to train people living in or near the area’s eight zones to work for owners of Opportunity Zone projects, said Traci Marques, the center’s executive director and CEO.

Most of the local Opportunity Zone projects are hotels and are not expected to open until 2021, so the training programs aren’t expected to launch until sometime next year, but the center already is determining how many people in its job seeker database live in eligible areas, she said.

VanderWerf is hoping the IRS will adopt the rule that he and the National Association of Counties are pushing, in part because he was invited to the White House in October to talk about the proposal. He also is trying to cultivate support in Congress, starting with Sen. Tim Scott, R-S.C., a sponsor of the Opportunity Zone program that eventually was included in the 2017 tax bill, who has cited the need for more and better jobs in economically distressed areas.

The program allows investors in Opportunity Zone projects — which can include residential and commercial real estate as well as operating businesses — to delay paying federal income tax on investment profits until 2026. If they don’t cash out of the projects for 10 years, the increased value of the property or business is exempt from capital gains tax. To get the maximum tax benefit from zone projects, the investments must be made this year.

Jim DiBiase, a partner in the downtown Marriott project, applauded VanderWerf’s initiative but said the hotel is in the early stages of construction and won’t start hiring staff for another year.

He is consulting with the workforce center to gear up its hiring effort and added that finding hotel staff is difficult because of the seasonal nature of the industry, which generates 70% of its revenue in the summer.

Bobby Mikulas, CEO and founder of Kinship Landing, a boutique hotel project in the downtown Colorado Springs zone, said he likes VanderWerf’s plans but the hotel likely will not be hiring until next summer at the earliest, and will first look at job candidates’ qualifications before considering where they live.

“We would love to hire people from within Opportunity Zones. We want Kinship Landing to be a true asset to the area,” Mikolas said. The hotel is under construction and scheduled to open in late 2020.

Contact Wayne Heilman 636-0234 Facebook

Contact Wayne Heilman 636-0234



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