Two census tracts within the City of Port Orchard boundaries have been selected as state Opportunity Zones, in which investors who develop properties within them can take advantage of tax breaks provided by the federal government. (Washington State Department of Commerce illustration)

Two census tracts within the City of Port Orchard boundaries have been selected as state Opportunity Zones, in which investors who develop properties within them can take advantage of tax breaks provided by the federal government. (Washington State Department of Commerce illustration)

Port Orchard snags Opportunity Zone designations for two city tracts

The city receives the sole set-aside designation in Kitsap County.

PORT ORCHARD — Two census tracts within the Port Orchard city limits have been designated as “Opportunity Zones” by Gov. Jay Inslee, enabling the state to offer federal tax breaks to encourage development and job creation to potential developers who build in those areas.

On April 20, Inslee approved 139 census tracts in 36 Washington state counties for Opportunity Zone, or OZ, status. One of the two OZ tracts in Port Orchard was approved through a statewide competitive process led by Nick Bond, the city’s community development director. The second designated tract was obtained through a Kitsap County set-aside process, Port Orchard Mayor Rob Putaansuu said.

“We’re appreciative of Gov. Inslee and the Washington Department of Commerce for their support of our application to include our downtown area in this very helpful program,” Putaansuu said in a news release.

“The OZ status will attract needed investment and support our efforts to redevelop downtown Port Orchard.”

The OZ program was established as part of the U.S. Tax Cuts and Jobs Acts legislation passed by Congress and signed by President Trump in December. According to city officials, qualified census tracts designated for the program will provide incentives for investors, deferring capital-gains taxes for reinvested funds and waiving new taxes on OZ gains after 10 years.

“The two zones in our downtown area include much of the recently established mixed-use pilot program, as well as the residential property tax abatement program, both created to encourage investment and redevelopment,” Putaansuu said.

“We are very grateful for the participation of our City Council and community leaders who provided support for our application.”

In a phone interview after the awards were announced, Putaansuu said he is encouraged by what he termed “another tool in the toolbox” for the city to spur economic development.

“I’m excited because I think this is another opportunity for people outside of our area to find advantages to invest in Port Orchard,” he said.

“We got the only competitive allocation in the county. That’s pretty exciting.”

Putaansuu lauded Bond’s work to piece together, with short notice, a compelling application package.

“Our development director put an exceptional package together,” he said. “The case spoke for itself.”

The mayor said the city’s chance to snag Opportunity Zone status for its two tracts was, for lack of a better term, opportunistic. He said the federal and state program’s availability had flown under the radar and was little-known in government circles until the application process was nearing its conclusion.

“Nobody knew about it until the tail end, so we really had to hustle with our package. We’re fortunate in getting it in … it’s a pretty powerful investment tool.”

Putaansuu said two of Port Orchard’s downtown census tract zones were eligible, as determined by demographics. Both include areas north and south of the Mile Hill Drive zone. The tract receiving OZ status is the zone to the south side, which includes a vacant complex behind KFC and up to South Kitsap Mall. A number of undeveloped multifamily properties behind the mall also are part of the tract.

Acknowledging that the surging economy has helped jump-start some economic development in the city, the mayor also said city staff members and the City Council “have a vision of where we want to go as a city, and that also has contributed to our forward movement.”

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