Prepared by: The Meriden Housing Authority (MHA) With Support from: The City of Meriden, CT The Meriden Economic Development Corporation MERIDEN, CONNECTICUT: (MEDCO) The Midstate Chamber of Opportunity Zone Prospectus Commerce Introducing Meriden, CT Meriden, CT is a multicultural, entrepreneurial, Since the Transit Center opened in 2018, ridership has city of 60,000, in the very center of CT’s reached its 5-year goal in – 18 months. The city is also a prosperous population belt. It’s been the hub of a key stop on Amtrak’s future high-speed NY-Boston line. region with over 2 million people for a century. The city’s diversifying economy is based on its Meriden was once an industrial powerhouse known being a regional hub of: as America’s “Silver City”. (Your grandmother’s silver- • Rail, Road and Bus Transportation ware or tea service was likely made here.) But after a • CT’s Transit Oriented Development (TOD) Plan generation of stagnation, in the last 5 years over $300M • Arts Oriented Development (AOD) and has been invested in private or public development. Its associated Retail Opportunities. Transit Center was rebuilt. Downtown housing is now • A still relevant Industrial era infrastructure full. And the city’s new HUB Park (Meriden Green) was • Expanding Regional Hospital built as a City Center that also eliminates prior flooding. • Significant Investments in low-cost Renewable During the post-industrial decline, Meriden Housing “Green” Energy Systems. Authority (MHA) worked with the city to buy failed Meriden is halfway between Hartford and New buildings, razing some, preserving some for high quality Haven; halfway between Manhattan and Boston. affordable housing for a family-oriented community. Amtrak and Metro North have already made New That investment led to a “turn around“, and the city’s Haven (20 min. away) a NY bedroom community; well-preserved historic downtown is now a major asset. and Meriden is now just 75 minutes from NYC. MHA effectively helped mitigate 5 decades of post- In the 1800’s nearby Middletown rejected the rail industrial decline, saved many beautiful buildings line. Meriden’s accepting it brought International created high-quality affordable or market rate housing, Silver and GM to the city. Now the “rail revival” is and is a state leader in sustainable energy development. once again bringing new traffic, residents, . workers and customers to a modern Meriden. Meriden’s 3 Opportunity Zones connect the city’s City rail traffic has grown from 5 to 32 trains/day, major interstate highways and railways to: 3 major retail aided by $150M in federal and state investment centers; a regional hospital; reborn classic downtown in the city’s rapidly growing TOD infrastructure; businesses; and with MHA, new downtown TOD-based resulting in $300 Million in recent investment. housing, as well as new commercial and retail buildings. 2 Opportunity Zone Tax Incentives The Opportunity Zone offers 3 tax incentives for investing in low income communities through a qualified Opportunity Fund. Temporary Deferral Step-Up In Basis Permanent Exclusion A temporary deferral on taxable A step-up in basis for capital gains A permanent exclusion from taxable income for capital gains reinvested in the Opportunity Fund is income of capital gains from the sale reinvested into an Opportunity increased by 10% if the investment in or exchange of an investment in the Fund. The deferred gain must be this is held by the taxpayer for at Opportunity Fund if the investment recognized on the earlier date at least 5 years, and by an additional 5% is held for at least 10 years. This which the opportunity zone if held at least 7 years, thereby exclusion only applies to the gains investment is disposed of or excluding up to 15 % of the original accrued after an investment in an December 31, 2026. gain from taxation. Opportunity Fund. Opportunity Zone Tax Incentive Structures The 2017 Tax Cuts and Jobs Act Established New Internal Revenue Code Section 1400Z – Opportunity Zones Four Parties are Involved: The Difference from Other Tax Credits: TAXPAYER: with Capital Gains (Taxed @ 20%) More Market-Oriented. No Benefit Cap QUALIFIED ZONE: Established by States and IRS Covers Residential, commercial, real estate or business investments. OPPORTUNITY FUND: Formed by Developers Investments in Businesses can also shield the Capital PROJECTS: Property Development & Businesses Gains from those investments. 3 Federal Agencies Aid Opportunity Zones: HUD, SBA, USDA, EDA & More Federal agencies are coordinating to prioritize their financial and programmatic resources to projects in Opportunity Zones. Through an Executive Order, the agencies have a mandate to explore all ways they can support the Opportunity Zone incentive. Reduction of regulatory burdens Assistance of Opportunity Zone Implementing inter-agency for Opportunity Zone loan & applicants in identifying & applying strategies to support planning & grant applicants. for federal assistance. regional collaboration. Ways existing loan and grant Ways state and local governments can programs can be used to leverage partner with federal agencies to support investments into OZs. OZ communities. AND Opportunity Zone regulations do not limit an investor’s ability to also benefit from the other substantial available federal and state incentives and subsidies. Federal Incentives, Credits & Subsidies State Incentives, Credits Utility Company Incentives, - 20% Federal Historic Tax Credit (HTC)* & Subsidies Credits & Subsidies - 9% & 4% Low Income Housing Tax Credits - 25% State HTC: Most of - Renewable Energy Credits (REC) for (LIHTC) downtown Meriden is in the Solar (can pay 40% of Costs). - 30% Solar Investment Tax Credit (ITC) State Historic District. - $25/MWh Co-gen REC (pays ~35% of - 20% Wind ITC - CT Housing Finance Authority the cost). - 10% Geothermal & Co-Generation ITC (CHFA) SSHP, HTCC, Flex, Sharp, - $500/Ton Geo-thermal Heat Pump * If combining the HTC with other credits, the HTC Champ and Catalyst grants and Rebate. is deducted from the basis of the others. forgivable loans. - Energy Efficient Appliances. Finally, Opportunity Zone investments were designed to work very well with New Market Tax Credits. 4 The Added Benefits of the CT Green Bank (GB) to Expand Opportunity Zone Benefits CT’s unique funding source is its Green Bank. Established in 2011, it supports clean, less expensive, reliable energy sources while creating jobs and supporting economic development. The GB has a multitude of financing programs for multifamily and commercial energy projects. Pre-Development Loans Construction Loans (Purchasing Equipment and Installation) The GB has 2 pre-development loans: • Low Income Multifamily Energy (LIME) loans for affordable multi- Navigator & Sherpa. Navigator’s interest family projects, provides unsecured financing at 6 – 6.75% over 5 – 20 rate is 1.99% for Affordable Housing and yrs. Requires 1.3+:1 project energy service coverage ratio. 3.99% for Market Rate. Developers • Commercial Property Assessed Clean Energy (C-PACE) financing, for match 25% of their pre-development Market Rate or Commercial projects, is secured financing at 5.75-7% budget. It funds energy-related audits or for 5–25 years. Requires 1+:1 savings to investment ratio. assessments, design, architecture and engineering. The loans are forgivable if a • Catalyst Financing is used as “gap” financing for affordable project does not go forward. multifamily energy projects that are close to 1.3:1 for LIME (1:1 for C- PACE). Rates are ~3% for up to 20 years. Its focus is health and safety Using “Passive House” design, resulting remediation that prevents energy projects from happening (such as in buildings that require little energy for roof replacement, cutting of trees that block solar panels, asbestos HVAC and reduce a building's ecological removal, etc.). Health & safety budgets are removed from LIME/C- footprint, the GB can fund more PACE and paid for by Catalyst to achieve a better savings ratio. architectural costs. Navigator allows developers to select their own energy • Solar Power Purchase Agreement (PPA), allows property owners to professionals. Sherpa is virtually install solar with no money down. Using a pre-approved local installer, identical; except that it funds technical the GB oversees installation and asset management. Owner buys the assistance by a 3rd party organization to electricity generated by the system at a significantly discounted rate. help property owners select energy • Note: With high CT kWh costs and Renewable Energy Credits (paying professionals for the project. ~40% of cost), a normal CT solar investment can pay-back in 5 years. 5 The OZ Urban Investment Prospectus: Table of Contents Section A: The City, MHA & Economics Economic context for the City and Meriden Housing Authority (MHA), identifying key drivers and assets Section B: Meriden by the Numbers Essential data showing a city on the move, and what needs to be done to re-knit spatial & social fabric Section C: Meriden by the Assets & Capacities Current/Recent Community Assets & Recommendations on institution-building options to expedite growth & inclusion Section D: Meriden by the Opportunity Zones Focus on human capital, job connections, and wealth creation Section E: OZ Projects & Investments Investment projects and propositions within each Opportunity Zone in 5 Sub-sections: Part 1) MHA & Downtown Historic District Sites Part 2) Other City/Local Developer – OZ Projects Part 3) MHA and Other Projects In and Out of the OZ Part 4)