By: AIF Staff
Last week, former Speaker of the House and American Idea Foundation President Paul Ryan moderated a conversation with elected officials, on-the-ground community leaders, and researchers about the development of Opportunity Zones. Opportunity Zones, which were part of the Tax Cuts and Jobs Act of 2017, are a poverty-fighting tool designed to stimulate investment and development in economically disadvantaged areas across the country through the use of tax incentives.
The virtual discussion provided an update on the progress being made and the challenges being faced by policymakers and community leaders as Opportunity Zones have started to germinate. Consistent with the American Idea Foundation’s mission, the panel showcased how Speaker Ryan is serving as a connector between policy makers, policy and analytical experts, and on-the-ground leaders. Joining Speaker Ryan in conversation were:
- Congresswoman Terri Sewell of Alabama, who is working to improve Opportunity Zones on Capitol Hill, ensuring they meet their mission of revitalizing communities.
- John Persinger, CEO of the Erie Downtown Development Corporation who is currently spearheading the development of a promising Opportunity Zone in Erie, Pennsylvania.
- John Lettieri, President and CEO of the Economic Innovation Group (EIG), who is adding intellectual analysis and key perspectives on the best practices for those involved with Opportunity Zones.
- Patrick McKenna of Catalyst Opportunity Funds, who provides analyses for investors so they can maximize the benefit for both businesses and communities in Opportunity Zones.
In introducing the panel, Speaker Ryan summarized the potential that legislators see for Opportunity Zones as a tool revitalize communities:
“Opportunity Zones hold the promise of being one of the most effective anti-poverty tools the government has designed in a long time. However, they also contain the risk of being yet another disappointing example of misaligned government incentives. The short-term results are promising, if mixed, but if Opportunity Zones are to fulfill their long-term promise, then governments at all levels must work together with the private sector to ensure that Opportunity Zones are meeting their goals.”
In an exchange with Rep. Sewell, Speaker Ryan noted the synergy required for this policy to meet its mission and how efforts are ongoing from Capitol Hill to the over 8,000 Opportunity Zones around the country:
“First and foremost, one of the unfortunate byproducts of using reconciliation for the Tax Cuts and Jobs Act was the fact that many of the reporting and transparency requirements were ‘Byrded’ out. Congresswoman Sewell has been leading on this by authoring bipartisan legislation that would improve transparency in these projects.
“Second, funds need to ensure that their incentives align with the goals of Opportunity Zones. That means putting in ‘opportunity targets’ that their projects should meet, along with the private sector returns for their investors. Finally, state and local governments need to make sure they are appropriately identifying areas where projects can make a difference.”
Detailing how her Alabama Congressional district has come together and embraced the concept of strengthening and improving communities using the benefits of Opportunity Zones, Democratic Congresswoman Sewell touched on why she became involved in this policy effort.
“I am a big believer of using everything in the toolkit that you have in terms of trying to figure out ways that we can huddle together with some public financing and with private financing that will actually endure to having better communities and revitalizing those communities. When I got to the Ways and Means Committee and we were working on the 2017 tax bill, while there were many provisions that I didn’t support, I really kind of honed-in on Opportunity Zones because I saw the potential, like the Empowerment Zones of the 1980’s and 1990’s, to have an opportunity to really affect underserved and smaller rural communities….
“I believe that this program has tremendous potential and I think that the legislation that we need in order to tweak it would be to provide better safeguards in terms of making sure that it actually is focused and targeted on the underserved and revitalizing those communities and making sure that those communities, actually have a benefit from it.
“In my district alone, we’ve seen the revitalization of a long vacant, American Life building in downtown Birmingham which will soon offer affordable housing. Likewise, we saw the investment in Spelman College, a historically Black college in my district in Tuscaloosa, Alabama. Perhaps what I’m most excited about is that in my hometown of Selma, Alabama, we see Opportunity Zones being utilized to provide renovations and rehabilitation for a beautiful hotel, called the St. James Hotel that sits on the Alabama River, right next to the Edmund Pettus Bridge.”
Rep. Sewell also talked about ongoing legislative efforts to improve the reporting and accountability requirements associated with Opportunity Zones:
“The first step to make sure that this program is working as intended is to collect the data about where these investments are going and what their impact is. This is why I’ve introduced bipartisan legislation with my colleague Rep. Ron Kind, as well as Rep. Mike Kelly, to develop and implement strong transparency and accountability measures. We need tools to determine the real-world impact of the program and to ensure that this program is being utilized as intended.
“Our bill is called the Opportunity Zone Accountability and Transparency Act. I am very proud that it has bipartisan support. The reporting requirements included in the bill will provide the data necessary for legislators as well as the American people to evaluate how opportunity zones are being employed and whether they’re fulfilling the mission of uplifting historically underserved communities. Our bill would require the Department of Treasury to collect data nationally and at the state level, [and obtain] a number of data points: The number of qualified opportunity funds, the amount of assets and the composition of the investments by asset class, the percentage of designated counties and communities receiving the investment and other economic indicators such as job creation, poverty reduction, and new business starts in these designated communities. In addition, our bill would also track the types of investment, who’s investing, what are the type of activities being supported, whether it’s multi-family residential or commercial properties or different economic sectors.
“I believe that our bill will make sure that this investment information is made public within the first year of enactment and so, not only will we provide that collection of this data but we’ll also make sure that there’s transparency to the American people. I believe that this important type of data will enhance the Opportunity Zones and give us a real indication of how the what the true economic impact has been on the communities where we have Opportunity Zones.”
Elaborating on why she decided to collaborate and improve a public policy that has critics on both the left and the right, Congresswoman Sewell said:
“I always look at the opportunities that legislation has and how I can utilize those tools to really help my district and I believe that many of the efforts to implement and strengthen Opportunity Zones can be bipartisan, like my bill. I believe our shared goal makes it possible and that this important discussion today and the ongoing positive discussions will continue about this issue.
“I understand the perspectives of my colleagues who have seen substantive concerns about the program. Governors across the country took varying approaches to the meaning of what Opportunity Zones [would be] … One of the things that my Governor did that I also really liked is that we established something called Opportunity Alabama, which is a non-profit that actually helps private investors and these Opportunity Zone funds find projects in our state and that is really a new to the benefit of my constituents.
“Like I said, I represent Alabama’s 7th Congressional District. It’s Alabama’s civil rights district. It’s my home district. I grew up in this district, but it is also one of the poorest and [it has] the highest unemployment district in the state of Alabama. What I know for a fact, since I’ve been able to live that American Dream is that people in my district deserve better opportunities and more resources. And look what’s possible! I’m a living example of a testimony of what’s possible for my district with those opportunities and I believe that we see these really great projects in my district where Opportunity Zones are making a difference. I believe that we can strengthen it by making sure that we have the collection of the data to be able to show the true economic impact.”
Rep. Sewell offered a Member of Congress’ perspective on the approach of the American Idea Foundation to bring legislators to practitioners on the ground to better facilitate the flow of ideas.
“I think that that is exactly what we need to do. I think that when we have an opportunity to visit each other’s districts, we can see that there are so many things that are more similar than differences that are so often highlighted by the press and, sometimes, by our own parties.
“I think that we have to be able to put party aside and really look at the needs of the people to solve these pressing issues like poverty. I think it’s really important that we go and see these areas and see the potential that lies there. This means being able to identify the needs specific to each community and leveraging the local, state, and federal resources available to really address these issues. We must build flexibility into our economic development incentives to allow capital to flow where the greatest need is….
“I do believe that having an opportunity to get outside of Washington and to really see how people live and to meet people where they are is critically important to the success, not only of Opportunity Zones but all of these incentives that will look to bring public and private partnerships together on behalf of the American people.”
Speaker Ryan summarized why this conversation matters in his concluding thoughts:
“The great promise of America is that the next generation is better off than the previous generation. For too many people in too many communities that promise seems to be breaking.
“Opportunity Zones have the potential to restore that promise by providing private sector capital to neighborhoods and communities that have been underserved for too long. We’re seeing that success already, and our panelists today are doing the hard work to ensure that the promise of Opportunity Zones is fulfilled.”
The hard work is ongoing to ensure Opportunity Zones mind their mission and are utilized as tools for revitalization and rejuvenation, not gentrification or displacement. By providing unprecedented amounts of investment and resources to help communities build themselves back from the ground-up, Opportunity Zones have tremendous potential. However, that potential will only be realized if lawmakers work collaboratively across party lines and strategically with local leaders and investors. Opportunity Zones cannot and should not primarily be a passive parking space for investors’ capital, rather these tax incentives should actively support the communities and the residents in them to improve outcomes and the overall quality of life in areas that have long been distressed.
The American Idea Foundation, led by Speaker Ryan, will continue to do its part so this public policy increases opportunities for residents to fulfill their potential and realize their version of the American Dream.