In Pullman, a Chicago residential neighborhood with high unemployment, a $35 million, 400,000-square-foot building is under construction. The industrial space, scheduled to open in April, could be a warehouse or logistical center.
The nonprofit behind the building, Chicago Neighborhood Initiatives, initially had trouble financing its development. Eventually Allstate, the insurance company, offered to fund it in exchange for tax breaks offered in what’s called an “Opportunity Zone.”
“When we started it a couple of years ago, we were looking at different financing tools and different ways to structure this,” said David Doig, president of CNI. In Pullman, an economically distressed community on Chicago’s South Side, CNI has ushered in developments from big-box retail to artist housing.
Opportunity Zones stem from President Donald Trump’s major tax overhaul in 2017. The federal program encourages investors to fund development in low-income communities through tax incentives. Opportunity Zones allow investors or for-profit companies to defer or reduce taxes on their capital gains.
If an investor has $2 million in capital gains, for example, it can put the money into an Opportunity Zone investment. One option for investors under the program is to delay paying taxes on that money for several years. Another option, if the investor holds the investment for five years, is to get a tax break of 10% on the amount invested, or to hold it for seven years, to get a tax cut of 15%.
The money goes to areas like Pullman. The state of Illinois determined the 133 Opportunity Zones in Chicago — the census tracts where investors can now qualify for those tax breaks.
But the economic impact of Opportunity Zones is hard to track because there is no oversight, at the local, state or federal level. Critics say that there isn’t enough oversight. As it stands, the IRS sets tax guidelines for investors. But the government does not track things like job creation or how much economic development results from those investments.
“It is pretty agnostic about what type of investment it’s incentivizing,” said Brett Theodos, a researcher who studies Opportunity Zones for the Urban Institute in Washington, D.C. Theodos testified before Congress last fall about changing the program to build in more accountability.
“I’m encouraging localities, states, philanthropies, impact investors and others to co-invest in projects that are more clearly going to produce a community benefit,” Theodos said. Earlier this month Theodos and other Urban Institute researchers released an assessment tool for investors, community groups, policymakers and others to use if they want to measure the impact of an Opportunity Zone project.
Without a system of oversight, it’s hard to pinpoint which projects have received Opportunity Zone investment money in Illinois or elsewhere.
The Chicago Housing Authority is an example of a co-investor. It’s using Opportunity Zone money from co-investor PNC Bank to add a commercial building to a mixed-income housing site in the city’s West Side. The commercial space will include restaurants and a health office.
“Quite likely this would not have been done without the incentive provided by the Opportunity Zone because of the large influx of capital needed in these depressed areas. The Opportunity Zones was a ‘but for’ instrument — but for the Opportunity Zone, we would not see $12.5 million invested,” said Michael Gurgone, chief investment officer for CHA.
David Doig in Pullman said Opportunity Zone investment money can only do so much for nonprofit developers.
“They’re a tool. Are they the end-all, be-all, are they going to solve all of our problems? No,” Doig said.
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
