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HUD ANNOUNCES CHICAGO SELECTED AS RENEWAL COMMUNITIES - ELIGIBLE FOR $17 BILLION IN TAX INCENTIVES

CHICAGO - The Department of Housing and Urban Development today announced that Chicago will be designated a "Renewal Community," eligible to share in an estimated $17 billion in tax incentives to stimulate job growth, promote economic development and create affordable housing. The 2000 Community Renewal Tax Relief Act established the Renewal Community Initiative that will encourage public-private collaboration to generate economic development in 40 distressed communities around the country.

As a result of this Renewal Community designation, Chicago will receive regulatory relief and tax breaks to help local businesses provide more jobs and promote community revitalization.

"These tax incentives will help businesses grow in some of our country's most challenging communities," said Joseph P. Galvan, HUD's Midwest Regional Director. "By creating the incentives that will promote job growth and economic development, we are joining with the private sector to restore economic vitality and restore whole communities in the process."

Renewal Communities will use the power of public and private partnerships to build a framework of economic revitalization in areas that experience high unemployment and shortages of affordable housing.

An estimated $6 billion in tax incentives are exclusively available for Renewal Communities across the country. As distressed areas, Renewal Communities will also be eligible to share in an additional $11 billion in Low-Income Housing and New Market Tax Credits.

These new RCs can take advantage of wage credits, tax deductions, capital gains exclusions and bond financing to stimulate economic development and job growth. Each incentive is tailored to meet the particular needs of a business and offers a significant inducement for companies to locate and hire additional workers.

Thirty-seven percent of the almost 200,000 residents who live in the 71 census tracts on the City's south side that compose the Chicago Renewal Community live in poverty and cannot afford basic necessities for their families. Twenty-five percent are unemployed. By cutting taxes and by waiving fees for construction and rehabilitation projects, improving local services and reducing crime, Chicago hopes to attract businesses into the 16 square miles that will make up its Renewal Community. For example, the City will expand the coverage area of the One-Stop Capital Shop, Inc., to the entire Chicago Renewal Community and will analyze non-emergency service requests from the Renewal Community to identify recurrent problems that should be addressed.

"These tax incentives will encourage even more public and private investment in our neighborhoods, which revitalizes our neighborhoods and improves our quality of life," said Mayor Richard M. Daley. "The new economic development tools will help us create new opportunities for housing, commerce, and employment * the building blocks for strong communities."

Tax Credits

• Wage credits are especially attractive to businesses looking to grow. These businesses are able to hire and retain RC residents and apply the credits against their federal tax liability. Businesses operating in the new Renewal Community will enjoy up to a $1,500 credit for every newly hired or existing employee who lives and works in the RC.
• Work Opportunity Credits provide businesses in Renewal Communities with up to $2,400 against their Federal tax liability for each employee hired from groups with traditionally high unemployment rates or other special employment needs, including youth who live in the RC.
• Welfare to Work Credits offer businesses a credit of up to $3,500 (in the first year of employment) and $5,000 (in the second year) for each newly hired long-term welfare recipient.

Tax Deductions

• Commercial Revitalization Deductions permit a State with one or more RCs to deduct $12 million per RC per year, up to $10 million per project for commercial or industrial buildings developed in the RCs. A business can deduct up to $5 million in the year the building is placed in service or deduct the full amount of eligible expenditures pro rata over 10 years.
• Section 179 Deductions under the tax code allow a qualified Renewal Community business to expense up to $35,000 of additional qualified property such as equipment and machinery acquired each year during the period of the RC designation, 2002 through 2009.
• Environmental Cleanup Cost Deductions allow businesses to deduct qualified cleanup costs in Brownfields.

Capital Gains Exclusions

Zero Percent Capital Gains Rate applies to an interest in, or property of, certain businesses operating in a Renewal Community, if the asset is acquired during the period of the RC designation and held for at least 5 years.

Bond Financing

Qualified Zone Academy Bonds allow state and local governments to match no-interest loans with private funding sources to finance public school renovations and programs.

In addition to the incentives described above, HUD will provide technical assistance to these communities to help make businesses fully aware of the many opportunities available to them. To make certain the Renewal Communities are successful in the initial stages of their designations, HUD will host an Implementation Conference in the spring of 2002 where the newly designated RCs will meet to hear from experts in the fields of business, taxes and economic development.

Other Incentives

Like all distressed communities, Renewal Communities will also be able to take advantage of the New Markets Tax Credits that provide investors with a credit against their federal taxes of 5 to 6 percent of the amount invested in a distressed area. Also available to Renewal Communities is the Low-Income Housing Tax Credit providing credit against Federal taxes for owners of newly constructed or renovated rental housing.

The 2000 Community Renewal Tax Relief Act authorized HUD to designate 40 Renewal Communities and seven new urban Empowerment Zones. HUD received more than 100 Renewal Community applications from communities around the country. Urban RC applicants were ranked according to their 1990 Census rates of poverty, unemployment and low-income households. Rural RC applicants were exempt from the household income factor. Bonus points were given for having low crime and having been identified by GAO as an extremely distressed area. In other words, the most economically distressed communities were awarded designation. Existing EZ/ECs also received a preference in rating and ranking.

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