On April 9, 2018, an exciting thing happened to economically-distressed areas across 18 states. They were designated as “opportunity zones.”
Now, in 2019 there are zones in all 50 states, as well as Washington, DC and five U.S. territories. These could be huge for your community, so your chamber needs to know what opportunity zones are and what they could mean for your community and investors. Read on.
What is an Opportunity Zone?
Under the Tax Cuts and Job Act of 2017, economically-distressed communities where new investments are occurring, under certain conditions, may be eligible for preferential tax treatment. According to the IRS, “Localities qualify as Opportunity Zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service.”
This program is not a grant. It’s relieving a tax burden to help increase investment. The money isn’t coming from
The federal government is encouraging investment in these underdeveloped areas the same way a teacher may have some student loan debt forgiven if they choose to work in an underserved urban or rural school. The government is making it economically appealing to invest in an area lacking resources that the developer might not otherwise consider.
Obviously, this is not something you can do overnight because your chamber wants to. However, this is becoming a push for areas that are struggling to revitalize and are looking for the capital to do so.
How Can the Chamber Get Involved?
Before addressing how the chamber can get involved it’s important to understand what’s behind opportunity zones. To qualify as an opportunity zone you need:
- a disadvantaged/distressed area. Putting in planters in an otherwise vibrant Main Street area won’t qualify.
- the right kind of investors. These investors have to care about bringing renewal, growth and wealth into the community because this type of investment isn’t usually as high a return as other real estate investments, like flipping a home in an up-and-coming area. It’s seen as a risky investment and some investors won’t want to get involved in it. While there is money to be made, it’s a labor of love to a certain extent too so you want investors that understand that and are willing to take the risk with little return.
- a connector. People from the area need to be matched up with the right kind of investor and both of those groups will need help getting the paperwork and application done to make it happen.
So how can the chamber get involved?
Educate Investors and the Community
The chamber is ideally situated to help educate the community about the possibilities behind opportunity zones. They are a relatively new addition to the tax code and many people and communities are just learning about them. The chamber can talk them up, hold lunch and learns about them, and/or look at areas in their community that might be ripe for them.
The chamber is the voice of business. It is connected to many local investors. While the investment can come from anywhere, it is often easier in these high risk, low return investments to get someone local. The chamber also knows the community’s story and is the perfect group to get the word out about what the area once was and what it could be again.
It doesn’t even require an individual investor. There are organizations out there that are setting up qualified economic opportunity funds, which are investment vehicles “set up as either a partnership or corporation for investing in eligible property that is located in a Qualified Opportunity Zone.” They bring the ability to invest in a zone to people who don’t have the capital of major investors or developers. If you have members who are offering these funds you could arrange for them to talk about them in a non-sales way and educating your members about how they can support the community. Since opportunity zones are so new there may be many of your constituents who haven’t heard of them.
Bridging the Gap
The chamber is connected to
These opportunity zones can make a huge difference for communities across the country. Not only is it a way to redevelop the areas that
Examples of Opportunity Zones
But it is important to know that this is a time-consuming process. Let’s take a look at communities that are already taking part in/working with the opportunity zones.
Tulare County, California
Tulare County Board of Supervisors recently commissioned an Economic Development Study and Implementation Plan where they identified several areas for opportunity zones. They looked at infrastructure needs and challenges, proximity to highway, job opportunities, market demand, and natural resources/development needs (like the need for a well or sewer). For example, one of the areas they identified as ideal for light industry but they made note of the need for a groundwater well before investment could be unertaken.
The City of Visalia took a note from the county on the value of opportunity zones and recently launched an opportunity zone web page that provides developers with an interactive experience that shows property details of each area.
Kansas City, MO
Kansas City, MO also has its own web page about investment possibilities. It has 32 zone opportunities including their jazz district listed. The site also has a section that tells the historic city’s story. It allows investors to “dive into a comparative analysis of each opportunity zone cluster by demographics, workforce, housing trends, and more.” They provide info about strengths, challenges, and “shovel-ready opportunities.”
onMain: Dayton’s Imagination District
Dayton, Ohio took it’s former Montgomery County Fairgrounds and breathed new life into it as an area that fosters “imagination, innovation, and inclusivity.” They have a vision for the onMain site to be one that connects Dayton’s historic past with an innovative future.
“The name (onMain) marks the district’s location on Main Street, and is an invitation to live onMain, work onMain, learn onMain and meet onMain,” said Mary Boosalis, President and CEO of Premier Health. They turned to input from 850 members of the community as they want to create a walkable urban living space that brings entrepreneurs to the area. There will also be mixed-income housing. Initial phases of the redevelopment will possibly require roadway changes, utilities, water and sewer, and removal of some existing structures.
Philadelphia is looking at its designated opportunity zones and weighing them against their 2035 Plans to assess if these zones require additional things like ample housing or if the City Council and the Planning Commission should be moving their development ahead of other areas. It’s also interesting to note that “the presence of Opportunity Zones now gives cities more leverage to negotiate pricing and terms with developers to increase that land’s value upon sale,” according to the article Seizing the Opportunity From New Opportunity Zones.
Louisville Forward is an economic development planning group that has been consistently named to the Top Ten Economic Development Organization by Site Selection Magazine. It also has an opportunity zone web page focused on investment opportunities. Their map of opportunity zones allows searchers to enter an address to find out if a business location is within an opportunity zone. They also have a database of interested investors.
What Third-Party Groups Are Already Doing for Opportunity Zones
There are lots of groups already getting involved in opportunity zones. Accelerator for America hosted a conference at Stanford University that was attended by people from all over the country. They organized a lightning pitch round to allow communities who had eligible opportunity zones to pitch investors for funding.
The National Council of State Housing Agencies (NCSHA) also has a national list entitled the Opportunity Zone Fund Directory to help funders find areas for investment.
Opportunity zones can be a big boon for your local community and investors. They benefit all different types of groups and can help the chamber become an even larger part of local economic development. In fact, many chambers are already getting involved and seeing the benefits. Check out what the Ashville Chamber of Commerce posted on their blog or what Union County has added to their website.
What is your chamber doing to promote your communities opportunity zones? Let us know in the Chamber Pros community on Facebook.