On January 9, President Barak Obama announced the first five “Promise Zones” winners: San Antonio, Philadelphia, Los Angeles, Southeastern Kentucky, and the Choctaw Nation of Oklahoma. The Promise Zone concept was initially introduced during the State of the Union address on February 12, 2013. According to a White House “issues” webpage, Promise Zones will “provide tools to revitalize communities by attracting private investment, creating jobs, improving affordable housing, expanding educational opportunities, and providing tax incentives for hiring workers and investing within the Zones.” A HUD media release provides capsule summaries of the first five Promise Zones. Only the Los Angeles zone summary mentions affordable housing.
Promise Zones will not receive direct federal funding, according to a HUD FAQ published on January 8. Rather, Promise Zones will align and focus in concentrated geographic areas, revitalization initiatives already available from the federal government.
Three existing federal programs are at the core of Promise Zones: HUD Choice Neighborhood Initiative (CNI) Implementation Grants, Department of Education Promise Neighborhood Implementation Grants, and the Department of Justice Byrne Criminal Justice Innovation Program. Programs from seven additional federal departments and agencies are also mentioned in the FAQ. Promise Zones will receive preference points and priority consideration when applying for existing programs, such as the Rental Assistance Demonstration (RAD), the Neighborhood Stabilization Program (NSP), and the integrated Planning and Implementation Strategy program (formerly the Sustainable Communities Initiative).
Federal staff will work with local stakeholders, providing support and technical assistance in Zones to help achieve more effective use of existing programs. Twenty Promise Zones are planned for the next three years. Promise Zone designations will have a term of 10 years.
The Administration is also proposing a new Promise Zone employment tax credit modeled on two components of the expiring Empowerment Zone tax credit program. If approved by Congress, the Promise Zone employment tax credit could result in tax expenditures (loss of federal revenue) of nearly $5.4 billion between 2014 and 2023, according to the Treasury Department’s “General Explanations of the Administration’s Fiscal 2014 Revenue Proposals”, dated April 2013.
Two Promise Zone employment tax credits are proposed:
- A tax credit for businesses on the first $15,000 of wages paid to employees who live in a Promise Zone. The tax credit would be 20% for Zone residents who are employed within the Zone, and 10% for Zone residents employed outside of the Zone.
- A first-year depreciation of 100% of the adjusted basis for qualified property placed in service in a Zone.
Thirty-one applications were submitted by the November 26, 2013 deadline. In the first round of Promise Zone designations, the only communities eligible to apply were those that had already received implementation grants from CNI, the Department of Education’s Promise Neighborhoods Program, or the Department of Justice Byrne Criminal Justice Innovation program. For example, San Antonio has a $29,750,000 CNI Implementation grant from 2012.
The HUD FAQ outlines the characteristics that future urban, rural, and tribal area Promise Zone applications must have. For example, in urban areas the one or more census tracts comprising a Zone must have a poverty rate greater than 20%, with at least one tract having a poverty rate above 30%. The Zone must have a population greater than 10,000 but less than 200,000. The Zone must have an active CNI, Promise Neighborhood, or Byrne Criminal Justice grant with boundaries encompassed by a proposed Promise Zone boundary.
Access the HUD FAQ on the Office of Community Planning and Development’s Promise Zone webpage at: http://1.usa.gov/1btps6n
Read the HUD media release with capsule summaries of the five Promise Zones at: http://1.usa.gov/1dCxKHi
Visit the White House “Issues” webpage, “Urban and Economic Mobility”, Building Promise Zones, at: http://1.usa.gov/1lNdrhJ
View the Promise Zone presentation from the Treasury Department’s April 2013 “General Explanations of the Administration’s Fiscal 2014 Revenue Proposals” (pages 104-107 and 244 and 246), at: http://1.usa.gov/19Z47oi