A communication transmitted from Louis A. DePasquale, City Manager, relative to Awaiting Report Item Number 18-35, regarding applying to designate certain census tracts as Opportunity Zones

C I T Y O F C A M B R I D G E Community Development Department IRAM FAROOQ Assistant City Manager for Community Development SANDRA CLARKE Deputy Director Chief of Administration 344 Broadway Cambridge, MA 02139 Voice: [phone removed] Fax: [phone removed] TTY: [phone removed] www.cambridgema.gov MEMORANDUM To: Louis A. DePasquale, City Manager From: Iram Farooq, Assistant City Manager for Community Development Date: March 27, 2018 Re: Policy Order O-8 dated March 19, 2018 regarding applying to designate certain census tracts as Opportunity Zones The Commonwealth recently completed a process through which cities with qualified census tracts could nominate those tracts to be considered for designation as Opportunity Zones. Under the 2017 Tax Cut and Jobs Act, Opportunity Zones are areas in which tax-advantaged investment can be made for the benefit communities with lower income residents. As states can designate up to 25% of qualified census tracts as Opportunity Zones, up to 138 census tracts could be so designated in Massachusetts. The Governor must submit the list of census tracts to be designated as Opportunity Zones to the U.S. Treasury Department by April 19th. The Opportunity Zone program offers tax incentives for investments to advance community development objectives in lower income communities. Investors with unrealized capital gains tax liability can defer and reduce this tax liability, and additionally avoid capital gains on investment returns in Opportunity Zones. Eligible investments are made in Opportunity Funds which can be used to make equity investments in real estate and equipment. Based on our experience with Low-Income Housing Tax Credit investment, we would expect that investing in Opportunity Zones in the city would be an attractive opportunity which could allow access to new capital which could assist with the affordable housing efforts in the city. Opportunity Zone investments could, for example, assist the Cambridge Housing Authority with modernization efforts in the nominated tracts. On behalf of the City, CDD has nominated two tracts for consideration for Opportunity Zones designation, the maximum allowed in the city given how the Commonwealth will allocate Opportunity Zones among municipalities. We expect to know by the end of April if the Cambridge designations are included the Commonwealth’s recommendations.