The Fredericksburg Food Co-op is developing an Opportunity Zone Fund program to help raise the $1.5 million it still needs for the grocery store it plans to open next year.
The nonprofit has already raised more than $1.7 million in member loans and more than $200,000 in equity through memberships for the community-owned store. It will be located in the former Kabul Mart at 320 Jefferson Davis Highway in Lee Plaza.
That space, like about half of the City of Fredericksburg, is within the federal government’s Opportunity Zone program, which allows investors to receive tax benefits on capital gains by investing those gains in qualified census tracts in the program.
Rich Larochelle, one of the co-op’s founders, said the Opportunity Zone Fund suggestion came from Fredericksburg Economic Development and Tourism Director Bill Freehling and department staff member Angela Freeman.
“We are working with banks and co-op development funds to raise about $1.5 million,” Larochelle said. “Investments through our Opportunity Zone Fund would reduce the amount that we would need to borrow from banks and others.”
He said that the co–op is working with a law firm with experience in developing Opportunity Zone Funds. It expects to be able to offer people the chance to invest in its fund before the end of the year. They’ll be able to defer the payment of taxes on capital gains and, under certain circumstances, avoid taxes on gains obtained through their investment in the fund.
Fredericksburg’s City Council also approved a Tourism Zone performance agreement with the co–op last summer that will provide it with an annual performance grant from the Fredericksburg Economic Development Authority. The incentive will be equal to 100 percent of the local sales tax revenue that the store will generate for the first five years, and 50 percent for the next five years.
The seed for the Fredericksburg Food Co–op was planted during a conversation friends had in 2015 about the need for a locally controlled grocery store that would carry local produce, meat and other goods. The organization now has nearly 1,250 members.
Co–op leaders have been interviewing candidates for its general manager position.