Too good to be true?

A provision within the 2017 Tax Cuts and Jobs Act offered the possibility of bringing investment funding to low-income, marginalized communities across the nation that otherwise see little outside funding for community and economic development.

But just how effective this "opportunity zone" program proves to be isn't yet clear. Many are asking what impact it may have.

Opportunity zones are designated census tracts where the poverty rate is at least 20 percent, or the median income does not exceed 80 percent of the metropolitan area median family income.

The goal of the opportunity zone program is to encourage investment in these communities through opportunity funds, which are entities that themselves make investments into opportunity zone projects.

Here's how the program works in practice: Sally purchases stocks for $50,000, then decides later to sell the stocks, which now are worth $150,000. Normally, Sally would have to pay a capital gains tax on the $100,000 she profited in the deal.

Now, however, she can invest that $100,000 into an opportunity fund to defer tax payment on those gains until 2026. Meanwhile, the opportunity fund identifies projects in opportunity zones around the nation that may yield a healthy profit for investors, have a beneficial impact in the actual community, or both.

And if Sally keeps her $100,000 in the opportunity fund for seven years, she will receive a 15 percent tax deduction on the original gain. After ten years, any additional profit Sally makes on her initial investment would be completely untaxed.

But economic and community development experts across the Capital Region expressed varying levels of optimism about the program and how effective it might be within the 20 designated opportunity zones across the Capital Region.

Gov. Andrew Cuomo gave Empire State Development and the Regional Economic Development Councils the task of identifying eligible, low-income census tracts to be submitted as eligible opportunity zones to the U.S. Department of the Treasury, which ultimately chose which tracts were selected.

Statewide, 514 out of over 2,000 total low-income census tracts were selected as opportunity zones. The U.S. Treasury ruled that only 25 percent of low-income census tracts could be designated as opportunity zones, meaning some poorer areas were left out.

In Albany, the South End, Arbor Hill, downtown, University Heights, Lincoln Park and the South Waterfront area are the city's six opportunity zones.

There are also opportunity zones in downtown Troy and downtown Schenectady, as well as in parts of Corinth in Saratoga County, and in Warren County.

Ideally, community development experts say, opportunity zones would attract investment for things like affordable housing in Arbor Hill or for grocery stores in the South End, for example. But a key problem is that not all opportunity zones are equal.

University Heights is located within census tract 21, and is made up largely by the Sage College and Albany Medical Center campuses. It was designated an opportunity zone, while the census tract containing West Hill was not.

But census data show the median household income in the University Heights census tract is over $20,000 more per household than it is in West Hill, and the unemployment rate in West Hill is 13.8 percent — over three and half times greater than in University Heights.

Skeptics of the opportunity zone program say that the federal program's regulations are lax, and don't discern what kind of projects an opportunity fund can invest in, or whether those projects will necessarily benefit residents within the opportunity zone.

"The issue with opportunity zones is, because there aren't really that many regulations around what kind of projects can use opportunity zone investment, what kind of jobs do these opportunity zones investments create? What kind of housing development would the money go to," said David Craft, a community development clinic fellow at the Albany Law School.

"If there is going to be development that occurs as a result of an opportunity zone investment," Craft said, "will it be affordable to residents that live there?"

Several development experts cautioned against considering opportunity zones as a sort of silver bullet against the larger issues of poverty and blight. But they all said to consider the program as "another tool in the toolbox" of economic developers.

"In that respect, (opportunity zones) are representing a great opportunity for those in low-income communities," said Mark Castiglione, executive director of the Capital District Regional Planning Commission,. "They are not incentives that will fundamentally change the context of what is making those areas either attractive or not to developers. But (the incentives) certainly can add and make a good project better."

Castiglione said that opportunity zones will be key in exposing potential projects that may not have enough local support to a wider, national group of potential investors.

"If a project is on the fence of being viable, this investment pool makes it more viable," he said.

Currently, developers can post projects on places like the online Opportunity Exchange to find opportunity fund investors, but local organizations, like Capitalize Albany and the Center for Economic Growth, see this as an opportunity to market the Capital Region's traits to a larger audience.

Andrew Kennedy, president and CEO of the CEG, said his organization will help "call attention to projects that are out there, raise awareness to the investment community, but also the community in which projects are going in so people can be aware and prepared for the types of projects and investments coming down this pipeline."

Kennedy said opportunity zones won't suddenly make a bad investment a good one through tax incentives, but it could make projects more appealing for outside investors, as well as "reduce the amount of support a project would need from other sources."

Empire State Development chose which census tracts could become opportunity zones "based on guidance from the state's Regional Economic Development Councils, local and public input, prior public investment, and the ability to attract future private investment," Kristin Devoe, the upstate communications director for ESD, said in a statement.

"This was a data rich, regionally focused process, and all nominated tracts were subject to federal approval," she said.

But critics have argued that the inherently profit-driven approach of the opportunity zone program means a person isn't necessarily more likely to invest in a blighted community, whether it has the opportunity zone designation or not.

Instead, developers could look to build luxury condominiums in downtown Albany or other upscale developments with a higher profit margin than a project would have in a lower income area. Meanwhile, the opportunity fund shields an investor's capital gains from taxes, regardless of what the investment goes toward or the impact it may have on a community.

"If I'm an investor, why would I want to invest in affordable housing when I can do market-rate housing for more of a profit and take that profit out tax-free? That's a big concern," Craft said.

But for Dylan Turek, the economic development director for Troy, any investment is a win for a city trying to build itself out, even if critics might point out that Troy's opportunity zone is located largely in the downtown area, which already sees significant investment greater than what other areas of the town experience.

Turek said Troy has already received interest from outside investors on some development projects, but said investment in the downtown area is the first step towards developing Troy as a whole.

"We need to focus on our core to begin with to grow that reputation of having a revitalized downtown that people want to explore. As that happens, we'll move outward from there to start spreading some of that wealth," Turek said.

He also said the opportunity zone incentives can help push some projects over the edge by exposing them to a wider audience of investors. He even suggested a public-private partnership could utilize an opportunity fund to invest in something like infrastructure improvements.

Investors have until the end of this year to make an investment into an opportunity zone and receive the program's full tax benefit. But even so, regulators, community planners and investors themselves have been confused by some of the program's stipulations — Turek even described the way the program was put together as "haphazard."

But as the program rolls out and investments are made, there is consensus that the program could be better than nothing, and can be used in conjunction with other tax credits and policies to ultimately bring needed funding to projects in the area.

"The ideal outcome (of opportunity zones) would be to move people towards more opportunities , towards job access, towards a better quality of life, better housing outcomes in their communities," Castiglione said. "But I don't think the incentives by themselves will be a panacea to all the issues of those opportunity zones."