Validating Reforms that Expand Opportunity

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. 

The Foundation has included excerpts of all of the panelist’s contributions (Lettieri and McKenna, and Persinger), and included below are some highlights from Congressman Terri Sewell. 

Video of the Virtual Panel is accessible here.

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 7^th 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. 

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. 

The Foundation has included excerpts of all of the panelist’s contributions (Sewell and Persinger) and included below are some highlights from Speaker Ryan’s dialogue with John Littieri of the Economic Innovation Group and Andrew McKenna of Catalyst Opportunity Funds. 

Video of the Virtual Panel is accessible here.

The Economic Innovation Group has provided research, analyses, and recommendations on how individuals, communities, and businesses can achieve the maximum amount of benefits from Opportunity Zones. John Lettieri, shared his perspective on the progress that has been made in Opportunity Zones thus far and what may come next.  

Lettieri urged patience and continued evaluation before definitive conclusions are reached on the impact of Opportunity Zones. 

“It’s important to remember how early on in the process that we still are. It’s easy to forget that, because in legislative terms something that past almost three years ago is long in the tooth. There is often this political timeline that says we should be able to know by now, that we should be able to declare victory or failure or to have some kind of firm assessment. But when it comes to a market-based incentive like this, there is all kinds of market formation and groundwork to be laid before you really get to see what the potential of the policy in the real world looks like.

“It starts with the regulatory piece because investors can’t move forward in confidence, can’t raise capital, can’t deploy capital until the rules of the road are clear and that only just happened in December of 2019. Then they had about three months before the pandemic, so there’s a newness to this in the real world and, as with any new product in a financial marketplace, it takes years to really make that normal… 

“This was always conceived as a decade-plus policy fight for a reason because this is tackling a challenge that did not arise overnight. It is not going to be solved overnight. So, when you want to talk about real results, those need to be measured in decade-plus increments, but we can tell a lot about the design structure and whether those original ambitions and assumptions are proving to be correct. 

“Opportunity Zones were designed to be a very flexible malleable incentive that could be relevant to a wide range of communities and a wide range of needs within those communities. It’s not a type of policy where you have one-size-fits-all use case.” 

Andrew McKenna with Catalyst Opportunity Funds detailed the approach that investors take when evaluating how to make an impact in Opportunity Zones: 

“When we start with a project and we are talking to a developer who has a history of engaging in the community, [the] number one [question] is: Have you talked to the community about what they need? Why is this project important? What are you doing measurably to ensure that you’re going to deliver locally for the community on what you’re promising? 

“And when we show them a scorecard and say: This is how we’re going to measure this project. It is amazing how it aligns everybody’s interests. People are interested in the impact and they say: “I love measurement.” And this is what Congresswoman Sewell was talking about for measuring [impact via] legislation…. 

“We are so committed to the impact and we also have this core belief. I’m a very market-driven impact investor and [believe] that the market return will impact and attract more non-incentivized capital. The point isn’t just to have the Opportunity Zone capital coming in. I expect a 10x follow-on with more capital coming in behind this to engage communities and truly bring up the wealth factors. This is a catalyst. A catalyst to bring more investment behind it so the market rate return is going to track my return. And then our commitment to impact it over a 10-year period. We have the advantage of having a long-term use and when we’re looking at a project having a 10-year view to affordable housing is incredibly powerful to the overall return….

Lettieri also highlighted the diversity of Opportunity Zones across the country and what is needed for them to flourish: 

“Congresswoman Sewell mentioned Opportunity Alabama and what’s happening there. The diversity of types of things you see within those communities is amazing. The fact that an industrial city, like Erie, and rural Alabama are both seeing benefit from this policy in dramatically different ways speaks to one of the early successes of the policy which is that diversity and flexibility that allows it to match with local needs. 

“The second thing we need to see is scale. If you’re talking about a National Map of Places to really make a meaningful depth in the challenge that this was designed to address, you need a lot of capital. This has been one of the things that has hamstrung previous policy efforts. It just didn’t get to scale in getting private activity and private capital off the sidelines at the scale that was necessary….

“Opportunity Zones make deals that would otherwise be not attractive, much more attractive. But for the really, deeply distressed areas, to really do high impact things in those areas you often need even more concessionary capital than what the private market alone can provide. This is a perfect role for philanthropy to come in and provide loss guarantees and backstops to investors that make it less risky to take what is an enormous bet — because remember the tax benefit for Opportunity Zones only comes in for an investor after 10 years of committed capital in an Opportunity Zone investment. That’s a long-time horizon for any investor. That’s not normal for the marketplace. If, on top of that you’re asking them to do deals themselves that are extremely risky or have very low margin, there needs to be other factors that help to mitigate some of the risks that they may perceive if you really want to drive towards the highest impact stuff.”

Lettieri reiterated the importance of having local ambassadors and community leaders on the front-lines to assist investors, developers, and potential job creators locate high impact investments in Opportunity Zones: 

“One thing that we see in almost every successful market for Opportunity Zones is there is somebody coordinating that activity on the ground. This is another way that philanthropy can help fill the information gap that is so much of a hurdle for outside investors or for any anyone who wants to do good in these communities: How do they know what the needs are? Or what the opportunities are as far as where to put their capital? So, you have facilitators in cities like Baltimore, in cities like Norfolk, in Opportunity Alabama’s case in Birmingham and many other places and states where they are playing the intermediary role. This helps to bring in outside capital, attach it to high impact local projects, measure the transparency of it, and make that known to the community and get people on the same page, so these plans that may take 5, 10, or 15 years under normal circumstances can accelerate quite a bit and have a real time impact the lives of local residents We should do legislation, but these types of community partnerships are much more powerful in the long run than anything Congress can mandate of the private sector.” 

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. 

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. 

The Foundation has included excerpts of all of the panelist’s contributions (Lettieri and McKenna, and Sewell), and included below are some highlights from John Persigner, who is helping rejuvenate Erie, Pennsylvania.  

Video of the Virtual Panel is accessible here: 

In summarizing the challenges and the progress being made in Erie, PA, John Persinger detailed how this policy is spurring development and making a real impact:

“At the Erie Downtown Development Corporation, we are working in one of the poorest zip codes in America. The median income in our area right here is $10,631 so as you can imagine, there are individuals who have live a different lifestyle than every experience that you and I and probably everyone else participating in this webinar has experienced. I don’t think they’re understanding that [change] is coming from Opportunity Zones. For their perspective, they want [to be] optimistic about the changes that are to come. 

“To give you two concrete examples: As one part of our plan, we acquired and tore down a McDonald’s. I know you were a former McDonald’s employee but the McDonald’s in Downtown Erie, you would walk in there and there are people who were overdosing. It was a problem, right around people who are trying to live down here and so that was a problem we had to get rid of. Second, the individuals who are living down here don’t have a stable supply of fresh, healthy food. We are in a USDA-designated food desert. Your options are to go to the Dollar General that is a few blocks away or to go to a corner store and get some boxed items. They don’t have a fresh-food grocery store down here so, that is one of the things that we are going to bring to downtown thanks to Opportunity Zones. 

“We have five historic properties on a block that overlooks our main parking downtown. These properties are about a total of 100,000 square feet and have been vacant for decades, and they’re blighted. One used to house a former biker bar and what we are doing is turning that into a culinary arts district. There’s going to be a fully operating grocery store. There’s going to be a Food Hall with nine new businesses and there’s going to be a culinary incubator so the individuals who live in this community are not only going to have access to a fresh supply of healthy food but they’re also going to be able to tap into the jobs that are going to be created down here.”

Speaker Ryan asked Persigner about how Erie partnered with the community and the private sector to launch its rejuvenation campaign: 

“What’s great about Opportunity Zones is that it leaves it up to the local actors on the ground to fund the projects that need the capital. There’s no government timeline. There’s no funding cycle. There’s no application cycle. It is really up to the investors and the shovel-ready projects, so this is what we needed to turbo-charge our revitalization of downtown. There are a lot of people that have been a part of this process: The city [of Erie] for getting the comprehensive plan done; the private sector and raising the initial capital so we could get our work done; we work very closely with our Congressman, Mike Kelly, and our two Senators and our state elected officials. We work closely with a lot of outside groups like EIG and the Sorenson Impact Center who have helped us learn from other communities. There’s been a lot of teamwork. It has been four years in the making to get to this point of where we’re deploying capital, [and it was] a big, bipartisan, community effort to get to this point.”

In closing, 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.