In most cases, the first move in navigating the Opportunity Zones tax incentive and embarking on projects is to hold a convening that helps everyone begin to get the lay of the land. This is a forum for bringing in local and national experts to share practical information about the initiative, answering questions, airing concerns and ideas, and soliciting feedback about the kind of development stakeholders would like to see in their communities.
Many organizations and municipal governments have already hosted such meetings, each of them adapted to local contexts. The CDFA sponsored a convening in partnership with the Arizona Commerce Authority where public and private officials from banks, cities and investment firms fielded questions about such topics as 1) what draws investors to OZs, 2) how to leverage OZs for projects that benefit communities, and 3) how OZ investments can support rural communities.
Participants discussed strategies for how Opportunity Zones could support transit corridors, tribal land, airports, industry and start-up businesses. The event culminated in a discussion of how to develop a regional plan for Opportunity Zones, the need to strengthen partnerships with local and national financial institutions and to develop a unified marketing strategy to drive investors to the region’s most needed and important Opportunity Zone projects.
Initial stakeholder meetings also serve as a means to begin identifying local organizations that may potentially play the “quarterback” role for a community’s OZ efforts. These organization will represent the community in its discussions with government officials, developers and investors, and help to organize and direct the community’s OZ development agenda. This role is developed further in Step Two.
Identifying and engaging all the stakeholders who populate a community is, of course, vital to organizing a successful meeting. Each possesses different skills, tools and relationships that will be key to planning and implementing successful projects.
Community Development Corporations, aka CDCs, are champions of community development efforts at the local level. A CDC is a 501(c)(3) non-profit, community-based organization that serves the needs of low-income and underserved populations, often located in places that have experienced extreme levels of disinvestment. They pursue economic development, education or social services, community organizing and neighborhood planning. There are approximately 4,600 CDCs across the U.S. that create 96,000 housing units and 75,000 jobs on an annual basis.1 (As a starting point to identify CDCs in your community, visit the National Alliance of Community Economic Development Associations.)
Community Organizations are formal or informal entities whose leadership represents neighborhood interests, provides valuable services to the community, and promotes resident voice. In many cases, community organizations form organically, eventually becoming more structured and taking on broader roles in a neighborhood, and many have incorporated as CDCs. As network-builders and advocates, community organizations work to ensure that community change is reflected and shaped by the will of the people who live in the places they serve.
Involving community organizations and CDCs in Opportunity Zones strategy will greatly increase the likelihood of investments that are equitable and supportive of a zone’s existing population.
Community Development Financial Institutions (CDFIs) are key financial providers for supporting community development efforts. A CDFI may be an intermediary such as LISC, a bank, credit union, loan/microloan fund, or venture capital fund. CDFIs are focused on various efforts such as health care, education and community development. Although in existence since the 1880s, the Riegle Community Development and Regulatory Improvement Act of 1994 required that CDFIs be certified at the federal level by the CDFI Fund. Today there are more than 1,000 CDFIs operating in the U.S. Many CDFIs also manage a Community Development Entity, which makes them eligible to apply for and receive an allocation of New Markets Tax Credits (NMTC). Involving CDFIs will allow for Opportunity Zone projects to be supported by additional finance tools that could support types of investments not suited for Opportunity Funds. Some CDFIs may also create or participate in Opportunity Funds themselves. To find CDFIs in your community, visit the Opportunity Finance Network’s CDFI Fund Locator.
Development Finance Agencies (DFA) lead the charge in financing economic and community development efforts across the U.S. A DFA can be a public or quasi-public/private authority that provides or supports economic and community development through financing programs. Common financial tools used by DFAs include tax-exempt and taxable bonds, credit enhancement programs, direct lending, equity investments, special assessments and tax increment financing. The vast financing capacity provided by DFAs makes them a crucial partner for financing infrastructure, small business development and more that will be critical to the success of a greater Opportunity Zone strategy.
State and local governments are responsible for creating a regulatory framework for community development and often participate by creating attractive financing tools or incentives, favorable policies and capacity building programs. Currently, states have an important role to play in convening stakeholders in their local Opportunity Zones and providing consistent and clear education about Opportunity Zones and Opportunity Funds. In addition, both state and local governments are beginning to map and identify investable assets and sharing those resources on a dedicated state Opportunity Zones website. Government entities can also undertake the process of incorporating Opportunity Zones into their strategic planning and coordinate with other development finance programs and tools at the state and local levels that can be used alongside Opportunity Fund investments.
Philanthropic and community foundations are key players in community development and primarily participate through grant funding and capacity building programs. There is a growing trend for foundations to make impact investments in communities that, unlike a grant, create a financial return, but more importantly are focused on creating a sustainable source of capital with the mission of developing social improvements.
It also behooves community partners to identify attorneys and bankers active in the community, as they may be able to provide legal guidance, additional financing and critical advice necessary to completing a successful project.
Developers and investors can operate their own Opportunity Funds, which may make investments in any of the 8,700 designated Opportunity Zones across the U.S. It’s important to involve developers and investors in your community’s Opportunity Zone strategy early on, as they will be the primary source of Opportunity Zone investments and will play a substantial role in determining the projects that will be completed. Of course, the steps of this playbook suggest ways to help communities partner around selection.
Leaders of anchor institutions such as hospitals, universities and museums in or adjacent to Opportunity Zones are another vital set of players. They wield considerable economic and political power in localities and ideally have a shared stake in the wellbeing and growth of the local community, where their physical plant is sited, and where many of their employees live. They may be particularly invested in workforce and small business development for procurement strategies. They may also be a source of rich data on the area (e.g. in the case of hospitals that keep local health data).
Leaders of faith-based organizations may also be key stakeholders in the community. Their congregants are often residents of local OZ neighborhoods, and their mission will very likely dovetail with the goal of equity and inclusion inherent in authentic OZ development.