Opportunity Zones: Time for Local Communities to Get in the Game
Article By Erin Gillespie
Opportunity Zones are a buzzword from coast to coast, a hashtag, a trending investment topic of conversation, whether that’s on finance blogs, news sites or social media.
The private sector across the United States is moving quickly to understand the rules of the Opportunity Zone game. Investors are looking for good projects, developers are marketing their projects as they search for investment, and Opportunity Funds are looking for both strong projects and sound investments.
Investors and developers have already begun to create a plethora of Opportunity Funds. Those funds have already started investing in projects in the more than 8,700 zones across our country.
These investments are happening, for the most part, without community involvement. The Tax Cuts and Jobs Act of 2017, which included the Opportunity Zone legislation, provided that these investments can be limited to the investor and the IRS, without requiring federal, state or local input.
Streamlining bureaucracy at the federal and state level is helpful to small businesses, developers and investors who want to make the most of this program. But if communities want to be involved, they need to create a seat at the table.
Cities and counties across the U.S. are varied and unique. Small rural communities are desperate for investment, any investment that will increase economic output and bring needed jobs. Large urban cities and counties have a multitude of challenges: the contrast of high unemployment rates and the need for job growth with the potential for displacement and gentrification.
There are communities across the country who are beginning to discuss this issue and grappling with how to wrap their arms around the right kind of Opportunity Zone investment. The problem is that while communities are still trying to understand the program, private investors are already making investments.
How Can Communities Attract Investors?
Communities need to get in the game. The single most important step communities can take right now, is to have a community vision for their Opportunity Zones. There are a few cities across the country who brought together stakeholders to form a vision and put their vision on paper for all to see, and those cities are now leading the pack.
There are resources readily available online for cities and counties to use as templates to put together this vision. The Opportunity Zone Investment Prospectus Guide from Accelerator for America lays out a common template communities can complete to market their zones.
The steps a community should take to find their vision and then market that vision can look something like this:
Designate a lead on the project: One agency or organization needs to be responsible for shepherding the community’s OZ vision forward. This can be a local government agency, a chamber of commerce, economic development organization or nonprofit.
Gather stakeholder input: This can be done through community forums, online surveys, small group meetings or other means to gather input from a wide variety of community stakeholders. This should include, at a minimum, local elected and appointed officials, developers, investors, real estate professionals, finance professionals, and small businesses. Tax attorneys, accountants and consultants who understand Opportunity Zones can be very helpful in this discussion.
Write your vision down: Put together a community prospectus, or marketing plan, to tell investors what your strengths and weaknesses are. Economic statistics can help tell your story by illustrating your workforce, major industries, major employers and more. Be honest about your challenges and highlight the opportunities. Make sure you know what property is available in your zones and what businesses are looking toward major growth.
Tell your story: Take your vision and share it with your audience. Start locally, by ensuring the businesses and developers and investors in your community know the opportunities available. Then tell your story more broadly. You can do this through social media and online by sharing your prospectus with other communities and states.
Sell your story to investors: Tell them why to pick you. Why is your community better/different/unique/special/worth their time and, more importantly, their money. Pitch your vision to find the right investment. A dedicated marketing plan or marketing team that works with Opportunity Zones and Opportunity Funds can make this easier for you.
If you complete these first five steps, you will have a marketable vision for your community’s growth in Opportunity Zones. But there is more to be done.
How Can Communities Attract the Right Investment?
There are many ways communities can drive investment in a particular industry or to a particular geographic area, once the basic community vision is complete.
Some communities are desperate for affordable or mixed-income housing, some have industrial parks that are looking for major manufacturing or distribution investments. Others need assisted living or nursing home facilities for the elderly, or really want to capitalize on small business growth in a downtown area.
Communities all across the country have a diverse set of wants, needs, challenges and successes. All of this can help them drive particular investment, but the public sector must commit to stay involved.
Even with no direct involvement in the Opportunity Fund investment process, local governments still have control over local development. Permitting, zoning, infrastructure and more is under local government or state government control, and all of these pieces can help drive specific investment in zones.
For example, streamlining permitting processes can help ensure zone investments are made in a timely manner, a critical component to the current guidelines. Permitting can cause monthslong or yearlong delays in some cities, and can hamper Opportunity Zone investment because of the strict time frames.
Rezoning can also be used to drive specific investment. If the local government wants certain properties to be used for affordable housing, ensuring the zoning matches the desired development can mean time and money saved for developers and investors.
Local governments can look at infrastructure improvements in zones as well. Adding improved roadways, sewer and water infrastructure, and even high-speed internet access can all make particular parcels or zones more attractive than they currently are for investors.
Next Steps for Opportunity Zone Investments
The private sector continues to outpace the public sector in the Opportunity Zone field, but local communities can catch up with a dedicated commitment. In the next few months, additional guidance on Opportunity Zone investments will be coming out from the U.S. Department of the Treasury. This guidance will provide more information to investors, developers and communities on how investments will be made over the next 10 years.
Communities need to engage today. This will help ensure that investments are made with the support of each community and are compatible with the vision of each community.
Low-income communities in Opportunity Zones across the United States will draw investment and grow over the next decade because of this legislation. Your community may be one of them. So, get in the game. Learn the rules. Meet the players. Have a goal. And get started. Your community deserves the opportunity for growth, and you can help make sure this growth impacts your community positively for decades to come.