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State Treasurer: California Is Open For Business, Will Comply With Opportunity Zone Program

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Newly elected California State Treasurer Fiona Ma is on a mission to support the governor's effort to build more housing in California through the new opportunity zone program.

Since taking office earlier this year, Ma and her staff have been busy on the road across the state, meeting with business leaders at community and professional business forums.

California State Treasurer Fiona Ma and Deputy Treasurer for Housing and Economic Development Jovan Agee speak at the Opportunity Zone Expo in Los Angeles
Deputy Treasurer for Housing and Economic Development Jovan Agee and California State Treasurer Fiona Ma speak at the Opportunity Zone Expo in Los Angeles.

With California Gov. Gavin Newsom stating he wants to build 3.5 million new housing units in the state by 2025, Ma sees the new opportunity zone legislation that allows investors to place projects in low-income areas in exchange for a tax benefit as a way to meet the new governor's lofty housing goals. Newsom's proposed budget is circulating in the state legislature.

Though some expressed concerns whether California might enforce the mandatory state 13.3% capital gains tax after the sale of an opportunity zone project, Ma said that is not the case. California is one of 12 states that had yet to conform with opportunity zone benefits for tax year 2018 as of November, according to KPMG.

"The good news is through [the governor's] budget, we want to fully conform with the federal government in terms of opportunity zones," Ma said as the keynote speaker at the Opportunity Zone Expo in downtown Los Angeles. 

"Everyone here in California that wants to stay here, invest here and build their projects here, we want you to stay here," she said. "California is open for business."

Ma’s statement capped off a full day of workshops regarding the new federal legislation at the Opportunity Zone Expo held at the JW Marriott.

About 1,000 people attended the event, highlighting the growing interest from investors, developers, wealth managers and commercial real estate brokers in the opportunity zone space.

“We expected 300 and we have 1,000 people,” OpportunityZoneExpo.com CEO Ali Jahangiri said. Jahangiri said he is planning another opportunity zone conference in Las Vegas in May.

Passed under President Donald Trump's trillion dollar Tax Cuts and Jobs act in the end of 2017, the opportunity zone program allows investors to roll over capital gains or invest traditionally through a qualified opportunity fund on a property or a project in a designated opportunity zone, which are low-income and distressed areas, in exchange for the deferment or elimination of capital gains depending on the length of the investment. 

The governor of every state last year designated opportunity zones based on census data.

California has 879 designated opportunity zones, the most in the nation.

There are 1,000 projects proposed in opportunity zones in California, according to Ma. More than half — 59% — are multifamily projects.

Ma said it is her office's goal to increase the supply of affordable and market-rate housing.

California State Treasurer Fiona Ma and Deputy Treasurer for Housing and Economic Development Jovan Agee speak at the Opportunity Zone Expo in Los Angeles
Deputy Treasurer for Housing and Economic Development Jovan Agee and California State Treasurer Fiona Ma at the Opportunity Zone Expo Los Angeles.

Ma said she is in the process of overhauling the state Treasury Department to streamline the development process. Her office is promoting a website that shows the state's excess land and makes it easier for investors to locate projects across the state.

"We are behind some of the other states that have been doing a little bit more in terms of [promoting their cities’ economic development] in conferences, on websites and webinars, but we are going to be catching up pretty quickly," Ma said. "We're revamping [the] office to do business. We want to be customer-friendly, host roundtables and introduce you to projects."

She said on top of the opportunity zone program, developers planning to build affordable housing in these OZ areas could also apply for the California Debt Limit Allocation Committee program, which manages the state’s tax-exempt bond allocations for affordable housing projects. 

Developers could also apply for the California Tax Credit Allocation Committee, which administers the federal and state Low-Income Housing Tax Credit programs.

"The only way to meet our housing goals is all of you," she said to a room full of commercial real estate investors and developers. "We need private investments and that is where we come in. We want to be the matchmakers. We want to introduce you all to projects that are out there and ready to go but lack the some of the funding to make the deal pencil."

Ma's deputy treasurer for housing and economic development, Jovan Agee, said in order to face the state's housing crisis everyone has to be on the same page.

"If we're truly going to walk the talk, if this is truly a crisis, it's going to take everyone irrespective of their political safe corner to figure out how to loosen our grip so slightly," Agee said about housing issues. "It's going to take all of us. ... You see what the governor is doing and what our office [State Treasury] is doing ... a culture shift is happening."