Opportunity Zones are poised to attract significant capital for new housing, businesses and jobs in under-resourced communities. At CNN.com, LISC’s Maurice A. Jones and The Kresge Foundation’s Rip Rapson take a closer look at what investors should consider when evaluating high-impact projects, drawing on decades of community investing experience to identify what works to raise standards of living and drive economic growth.
The excerpt below was published on CNN.com:
High-stakes race for tax breaks that could help low-income communities
By Maurice Jones and Rip Rapson
There is a high-stakes race afoot for America's nearly 32,000 underinvested communities. State officials are fast approaching a March 21 deadline to determine which communities will have the chance to attract trillions of dollars in untapped capital and the new housing, businesses and jobs it could support.
That is both the promise and the challenge of Opportunity Zones, a part of the Tax Cuts and Jobs Act that gives investors the chance to reduce their capital gains tax when they invest in distressed parts of the country. But states can only name 25% of their low-income neighborhoods as Opportunity Zones. Once designated, decisions are locked in for 10 years, creating some difficult choices -- and some clear winners and losers.
Nationally, the demand for capital is clear. More than 50 million Americans live in places with high rates of poverty and unemployment. Meanwhile, from 2010-14, just five metro areas produced as many new businesses as the rest of the country combined
Opportunity Zones can help change that, but only if they build on the already-proven community investment system of tax incentives, lending and grant programs, and follow the best practices that we know through decades of experience create the most impactful and equitable community investments.
The current lineup of interconnected public and private programs aimed at improving low-income communities has been under-resourced yet highly successful. They show us what could be achieved with the additional capital of Opportunity Zones, and demonstrate why it is so important to prioritize the needs of existing residents so they aren't displaced by rapid cost-of-living increases.
In Brockton, Massachusetts, for instance, a local health provider, Brockton Neighborhood Health Center, wanted to open a new clinic in a high-poverty community. In doing so, it hoped to support efforts to reduce blight, create jobs and improve quality of life. It teamed up with a family-owned grocery store and planned to build a new clinic and market, side-by-side on an abandoned corner. Together, the two developed a strategy to take on diabetes and other prevailing community health challenges.
Most investors who considered this project deemed it too risky for investment. To make the vision a reality, the duo needed capital from a different source. Our organizations -- the Local Initiatives Support Corporation and The Kresge Foundation -- teamed up with Morgan Stanley, and together leveraged the federal New Markets Tax Credit program to attract millions of dollars to the development. We made additional grants and loans to help construction move forward.
Today, that once dark corner is a hub of activity. The Brockton Neighborhood Health Center supports more than 19,000 patient visits a year, and has joined a busy grocery store -- Vicente's, which offers healthy food geared toward the local Cape Verde population -- to provide opportunities for people to live better.