Local economic development leaders are pleased with the news that Baileyville, Calais and the contiguous census tract comprised of Whiting, Dennysville, Pembroke, Baring and Meddybemps have been placed in the federally designated opportunity zone program. The program was established in the Tax Cuts and Jobs Act of 2017 as a new economic development program. The first round of zones was announced at the national level in April, and Maine joined the ranks with Governor LePage's announcement of the state's 32 selected tracts at the end of May.
     Maine Department of Economic and Community Development (DECD) Communications Manager Doug Ray says, "It's a one‑shot deal. It won't be happening every year." He adds, "There was no application process. It's a federal tax program and regulated through them. The state's role was through the governors." Governor LePage selected 25% of the low‑moderate income (LMI) census tracts for recommendation. "That's the only role the state has." Baileyville was one of two allowed tracts that do not fall in the LMI designation.
     DECD's role was to solicit public input. "The governor used that information as part of the selection process," Ray explains. The reason for the selection of the smaller towns in the contiguous tract, Ray adds, is because the tract met the federal requirement that it be "contiguous to Baileyville. That's why it was chosen."
     Sunrise County Economic Council, based in Machias, submitted three proposed zones to DECD. Executive Director Charles Rudelitch outlines the proposed submitted zones, with the first encompassing all qualifying census tracts but one; the second a coastal zone stretching from Lubec to Milbridge; and the third expanding from the mid‑point of Calais and going down the coast to Eastport and above to Danforth. The zone that was designated is not as large as those SCEC proposed, but it did include some elements of the third proposal, he says.
     Scott Beal, spokesman for Woodland Pulp in Baileyville, says, "Being in the opportunity zone offers an advantage to attracting capital investment to our community. When ownership weighs where to make investments, being located in an opportunity zone offers tax incentives on new investments within the designated area. When dealing with capital investments in the millions of dollars, having this in place is certainly a large consideration of where ownership will invest when evaluating the overall project's financial returns."

Application filed for two more tissue machines
     Woodland Pulp is a major economic engine in Washington County, employing about 310 people. The mill produces a premium kraft pulp manufactured using hardwood chips sourced from Maine and New Brunswick. The pulp is sold to paper-makers all over the world. A portion of the pulp is used by its affiliate company, St. Croix Tissue Inc., which is co‑located on the mill site and has two tissue machines in place. The company is starting the process to grow the tissue‑side of its operations.
     Concerning plans to expand the tissue operation, Beal says, "We filed an application with the Maine DEP [Department of Environmental Protection] Air Bureau on May 15 for two more tissue machines. Though no announcement has been made nor has the project received the necessary internal approval to proceed, we have to start the process by securing the necessary environmental licenses in order for the project to move forward, such as arranging financing, conducting the needed preliminary engineering and so on. We're also working on a companion piece of permitting under Maine's Site Location of Development regulations, sometimes referred to as the Site Law."

Potential projects eyed
     Julie Jordan, executive director of Downeast Economic Development Corp., is delighted with the news of the opportunity zone designation. "It has the potential to give us that edge to attract investment." She explains that she responded on behalf of her organization to the request for input from DECD. In her write‑up she stressed the "dedicated leadership focused on strengthening our efforts for economic development and demographic growth. That would be key to anyone looking here to invest." Since she heard the news she has reached out to DECD. "They helped me focus on what would be the best tactics to attract investment." She lists the strategies: have a defined project, whether new or in‑the‑works; approach investors with details; consider a consortium of investors.
     Calais City Manager Jim Porter, also a board member of the Downeast Economic Development Corp., says of the news, "The opportunity zone designation gives us one more tool or selling point for potential investment in projects that create jobs. We are pleased the governor recognized the need and opportunity for investment in our area."
     Jordan notes that her organization has a few potential projects nearing readiness for presentation to developers. "We've gotten some nibbles," with requests for market studies. The studies are nearing completion, "and now we can add the opportunity zone information," she says.
     Jordan has also been working on the Downeast broadband project for Calais and Baileyville. When asked if the opportunity zone status could help with that project, Jordan paused to think about it. "Right now, no," she says. "But it could help with that project if it were to expand." Because the utility itself would be located in the opportunity zone, if other communities in the county wanted to jump on the broadband wagon, it might be possible to attract investors if there were a guaranteed rate of return. She mulled some more and suggested some definite potential in the concept.

Will benefit entire county
    "I'm thrilled for the communities that were chosen," says Eastport City Manager Elaine Abbott. While Abbott was disappointed that Eastport didn't make the cut, she says, "What's good for those particular tracts, towns, is good for all of Washington County."
     Jordan agrees. "It benefits the whole county. All of these little pockets are realizing we get so much more done if we work together."
     Washington County Commission Chair Chris Gardner says, "We were pleased to see some opportunity zones chosen in Washington County. While I know there were other communities that were interested and I'm sorry there weren't more in the county that were chosen, we're looking forward to seeing how they [the designated zones] do."
     "Some of it's unknown," says Rudelitch. "It's a new program." But what is known, he says, is its "preferential treatment of capital gains, and it's especially powerful for real estate investments, especially those held for more than 10 years." It could be used for business equipment, but he expects that it will be most likely used for building renovations, new buildings and expansions. He expects that SCEC would likely play a part, in coordination with other economic development partners, if a local business, individual or outside investor were interested in investing in Washington County.
     Ray and Jordan stress that the IRS is still working on the tax details with an expected July completion date. Jordan relays that, in her conversation with DECD, she had wanted to know how investors would know about her community's designation. Her contacts at DECD told her that investors had been watching the project's outline unfold for the last year and were well aware of the program and all the designated zones now named across the country. She says, "It's great for the area. There's a lot of potential. I think we need to seize the opportunity of the opportunity zone."
     The IRS site about opportunity zones states that the zones retain the designation for 10 years. Investors can defer tax on any prior gains until no later than December 31, 2026, so long as the gain is reinvested in a Qualified Opportunity Fund, an investment vehicle organized to make investments in Qualified Opportunity Zones. In addition, if the investor holds the investment in the opportunity fund for at least 10 years, the investor would be eligible for an increase in its basis equal to the fair market value of the investment on the date that it is sold.
     The U.S. Treasury and the IRS plan to issue additional information with guidance addressing the certification of opportunity funds, which are required to have at least 90% of fund assets invested in opportunity zones.