Any politician can run for election on jobs, jobs, jobs. But, as we all know by now, campaign promises are more easily spoken and broken than actually kept. Here we consider how one political campaign is taking the perennial jobs promise seriously enough to welcome a gentleman who knows a thing or two about jobs creation—and letting this expert explain the very same development program this campaign’s gubernatorial team is touting.
Guam – Democratic gubernatorial hopeful Lou Leon Guerrero and her running mate Joshua Tenorio have had their eyes wide open for the right economic investment and development fit for the island they seek to govern.
“One of the chief challenges that we face today in our island is ‘how do we create jobs?'” Leon Guerrero told journalists and politicians gathered for a press conference at Lou & Josh campaign headquarters on Tuesday afternoon.
“And I was really very interested with the Opportunity Zone, because it gave us a tool to provide low-income affordable homes, it expands commercial, it expands small businesses and be able also to create jobs for our people of Guam.”
And the U.S. Treasury Department’s Opportunity Zones program could be an economic bonanza waiting to happen if Guam’s next governor plays his or her cards right.
It’s an incentive born of President Trump’s Tax Cuts and Jobs Act that allows well-heeled taxpayers to put off paying taxes on capital gains till 2026, if those profits are reinvested in “opportunity funds” – equity funds that invest in businesses located in communities recognized as “opportunity zones.”
“And it’s designed to stimulate a local economy by tapping into the $6.1 trillion dollars of idle, unrealized capital gains that is kinda sittin’ on the sideline right now,” said Brett Parker, visiting CPA and Principal with Novogradac & Company. Parker provided an informal presentation of the federal program on behalf of his accountancy.
So the idea is to give investors good tax-saving reasons to reinvest profits in places that need seed money to get their economies humming again. Places like Guam, that are rife with economically distressed communities and statistics showing nearly a quarter of the island’s population living below the poverty line.
Investors get tax incentives for investing in low-income urban and rural communities across the country. And being a small developing economy itself, Guam is considered a potential investment haven with 25 Designated Qualified Opportunity Zones shown so prominently in yellow on a presentation map that the zones effectively engulf half the island.
Parker says investors “provide equity financing for the creation of new business property as well as substantial rehabilitation of its existing business properties in the 25 designated zones in the island of Guam.”
“The Opportunity Zone, you’ll see that it’s all the way from Malesso-Umatac all the way up to Yigo,” Leon Guerrero said.
The official qualification of so many zones on Guam suggests a certain concentrated advantage for the island, should the next gubernatorial administration see fit to leverage the program relentlessly enough to effect lasting change. Parker suggested to those gathered that having so many disadvantaged communities on such a small island can actually put Guam at a distinct advantage in accordance with the Opportunity Zones’ rules of engagement.
“Because of the size of Guam, you guys really have big benefits here, in that in other states, you get only 25 percent of…a small portion,” Parker said. “So it works out to like 11 percent of the country, whereas in Guam—because of the size of Guam—you sort of have more zones here, so there’s a real opportunity there.”
Any prospective investment destination seeking to leverage a federal program must have its ducks in a row to make the best use of a good thing. And in listening to an expert, it would seem Guam may have found the just the right fit that at least one gubernatorial team’s been looking for, for a couple of reasons that Parker laid out.
“Unlike other development programs, like low-income housing, where there’s sort of a maximum amount you can do, in this program, there’s no maximum, there’s no minimum, the investment can vary widely.”
Parker says the Opportunity Fund program is simple, cheap to get started, and designed to capture as much of that $6 trillion in accruing capital gains as possible. With GovGuam’s fiscal year budgets tightening under the Tax Cuts and Jobs Act, it may be high time for this island to find ways of improving its economy under provisions found within the very same federal tax advantage legislation.