Port Orchard seeking Opportunity Zones development incentive designation

City officials are sprinting to apply for tax-incentive status for the downtown business tract.

Mayor Rob Putaansuu

Mayor Rob Putaansuu

PORT ORCHARD — Hoping to get a leg up on other Kitsap County communities, Port Orchard city officials are quickly putting together an application so that part of its downtown area could be designated as an “opportunity zone” for encouraging economic development through tax incentives.

According to the state’s Department of Commerce officials, there are 555 census tracts eligible for this designation in Washington state, so 139 — or 25 percent — may be designated as Opportunity Zones. Gov. Jay Inslee instructed the department to develop a process so that distressed communities can apply for special designation to incentivize new business investments through the recently passed U.S. Tax Cuts and Jobs Act.

The Department of Commerce has begun accepting applications from municipalities throughout the state that have census tracts with an individual poverty rate of at least 20 percent and median family income of up to 80 percent of the area median. The fast-approaching deadline for applications to the federal program is March 26.

Nick Bond, city community development director, told the City Council at its Feb. 27 meeting that the Opportunity Zones designation in portions of Port Orchard would be another beneficial tool to help incentivize development.

“I think we would incentivize the census tract downtown,” Bond said of the qualified area encompassing most of downtown.

Mayor Rob Putaansuu said Port Orchard has two census tracts within city limits that would meet program requirements: the Bay Street downtown business area and a section of the city bordered by Bethel Avenue and Mile Hill Drive, and Beach Drive and Sinclair Inlet, including the Annapolis and Waterman sections of town.

He said the city will ask Commerce to include a portion of the census tract that includes a portion of land across from Blackjack Creek, near Westbay Center, and an area just south of KFC on Bethel.

Putaansuu agreed with Bond that the city would be better positioned to prioritize the downtown tract as its sole Opportunity Zones submittal, not both.

“I’m hearing that each county in the state will be getting one census tract (chosen by the Department of Commerce for the program),” he said. “If we fine-tune our request to this one tract, that’s probably our best bet.”

Putaansuu told council members he was soliciting support from a number of federal and regional leaders, including U.S. Rep. Derek Kilmer, with whom he met earlier this month.

Bond said the Opportunity Zones program is predicated on restructuring federal tax obligations for developers planning to build in those selected census tracts.

According to the staff report summary to City Council members, the federal program, administered by the state Department of Commerce, is “designed to provide tax incentives on capital gains that are invested in Qualified Opportunity Funds that, in turn, are invested in distressed communities designated as Opportunity Zones by the governor in each state. Up to 25 percent of the low-income census tracts in each state can be designated as Opportunity Zones.”

The community development director said Port Orchard’s creation of a mixed-use development pilot program downtown and the recent announcement by developers of their plans to build on a city-owned lot on Bay Street should demonstrate the city’s efforts toward revitalizing that distressed census block.

“We also have passed the residential tax abatement ordinance, so that’s a second step that’s helped illustrate the city’s commitment to this area,” Bond said.

At the Feb. 27 City Council meeting, members voted unanimously to pursue the special designation and draft a letter to the state Department of Commerce that would endorse Port Orchard’s inclusion in the Opportunity Zones program.

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