The Gulf Opportunity Zone (GO Zone) Act was passed by the U.S. Congress soon after Hurricane Katrina roared through Mississippi. It was touted as the panacea of the Coast’s recovery. The Gulf Coast Business Council credits the incentives, particularly interest free bond financing and bonus depreciation, with spurring a wave of economic development.
Recent legislation that removed the minimum start date for projects is expected to facilitate more construction starts.
“This action was very important as many projects that had not yet started by the end of 2007 (the start deadline) would not have gone forward without this fix to the GO Zone law,” said Gulfport attorney John Harral, who’s worked with clients using the legislation’s incentives. “Of course, the developers have been waiting to see if Congress would act. Those projects will now be able to move ahead, bringing significant investment to the Coast counties.”
These projects have not been announced as investors put them on hold while waiting to see if Congress would grant the extension. They include multi-family residential apartment complexes, commercial retail projects and more, Harral said.
“While the elimination of the depreciation start deadline is important, we must recognize that the other GO Zone deadlines by which projects must be placed in service, generally the end of 2010, are still very difficult to meet,” he added. “This deadline applies to the depreciation incentive, the extra Katrina historic tax credits and even the GO Zone tax exempt bonds.”
He says 2010 may have seemed like a long way off when the legislation was passed, but Coast residents in the areas hardest hit by Katrina know the almost overwhelming challenges of rebuilding the water, sewer and road infrastructure. Greatly increased costs and availability problems with insurance have also added to delays in planning and building projects, making it impossible for many of them to be completed by 2010.
“I would hope that Congress will recognize that and act to extend the in-service deadline,” Harral said. “Doing so would insure that the GO Zone legislation would have the effect that Congress originally intended — a stimulus to investment to help the Coast rebuild.”
Gulf Coast Business Council president Brian Sanderson says the incentives are not generating as many projects as people expected in the beginning.
“But certainly they have been helpful,” he said. “There has been a lot of interest, but environmental, zoning and other issues have delayed some projects. Now that the construction date has been lifted, others will go forward.”
Larry Barnett, executive director of the Harrison County Development Commission, points out that opportunities exist for the region in aerospace, shipbuilding, advanced materials, geospatial and marine sciences because assets are already in place to support these market segments.
“The Gulf Opportunity Zone Act presents a perfect opportunity for the three coastal counties to attract businesses that want to benefit from the accelerated depreciation of 50% in the first year or the tax exempt bond financing.”
Historical properties are using the act’s 26% tax break as an incentive to restore buildings. Congress is being asked to extend this provision in the most severely affected counties.
Ann Daigle is an urban planner working with the City of Pass Christian and the University of Southern Mississippi’s Gulf Park Campus in Long Beach. She hopes a private developer who can take advantage of the incentives will be brought onboard to do the renovations to the campus’ three historical buildings.
“Campus enterprise is the big thing as universities look to diversify and become economically competitive by collaborating with the private sector,” she said. “GO Zone is a great tool to attract these investment opportunities. I hope we don’t miss out.”
Daigle is concerned that several Coast developments that were in the works have pulled out due to the market downturn combined with exorbitant insurance quotes.
“It seems we could take advantage of our incentives to lure people here to work since they are not investing anywhere else, if we could take care of the insurance crisis,” she said.
Contact MBJ contributing writer Lynn Lofton at email@example.com.