By Soua Vang, Interim Economic Development Director, Economic Development Department, San Bernardino County
As San Bernardino County begins to focus on economic recovery due to the impacts of COVID-19, tools such as Opportunity Zones can be an attractive catalyst for new development. This is because they provide lucrative tax benefits to developers and investors. There are 57 Opportunity Zone tracts found in 15 of the County’s 24 incorporated cities as well as in unincorporated areas of the County.
Qualified Opportunity Zones is a bi-partisan effort created by Congress through the 2017 Tax Cuts and Jobs Act to spur economic development and job creation in distressed and low-income communities. It provides a capital gains reinvestment mechanism that defers, reduces, and excludes tax liability on gains from qualified investments. San Bernardino County has one of the highest concentrations of Opportunity Zones in California. The tax incentive provides a strong add-on benefit for incremental returns, lowering required risk-adjusted yields expected by investors.
One example of an Opportunity Zone in action is development of an 11,325-square-foot medical office building in San Bernardino in a County Opportunity Zone that will house San Bernardino County’s Children’s Department of Behavioral Health (DBH). The investment benefits both public and private sectors and creates vital community benefit. It is led by Opportunity Zone fund manager RevOZ Capital, in a joint venture with Sudweeks Development and Investment Company.
Scheduled for completion in March 2021, the new building will house a children’s mental health facility. Sudweeks Development Managing Member Brandon Sudweeks shared that they enjoy creating public private partnerships with local government agencies. The firm is a long-time developer in the Inland Empire focused on healthcare-related development, especially targeting public-private partnerships.
While Sudweeks notes that public private partnerships can take longer to structure, it is worth it in the long run. As he states, the San Bernardino facility will provide the highest quality mental and behavioral healthcare, elevating the experience to patients and supporting the neighboring health facilities. The community further benefits from good paying jobs for people in the area and indirect job creation driven by construction of these facilities.
The value of bringing new investment to underserved communities underscores the importance of the Opportunity Zone program. Good things can happen when the public and private sector work together. Developers with projects that bring greater benefit to our economy, residents and create job opportunities will find tremendous support in San Bernardino County.
Academic research has shown that geographic regions that master an emergency and build social capital through transparent cooperation and communication emerge stronger and bounce back faster.
The County continues its post-COVID-19 multi-faceted recovery efforts that include programmatic Opportunity Zone support. To increase awareness of the advantages, the County created a video on Opportunity Zones which can be found at https://www.selectsbcounty.com/major-initiatives/opportunity-zone.