“How do we incorporate Opportunity Zones into our development strategy?” That’s a question on the minds of regional and municipal economic developers all over the country as America looks for avenues for recovery in the midst of the Covid-19 recession. Ever since Congress finalized rules for the OZ Program in January 2020, OZ investment has grown by leaps and bounds, potentially reaching as much as $75 billion, per the White House Council of Economic Advisors. However, the question of how those investments have impacted communities remains tied to how effective the OZ incentive has been to spur business and job growth.

It’s well known that the OZ incentive works for real estate investment. The problem, from the perspective of public servants, is that real estate investments don’t make the same impact on local economies as do new businesses bringing jobs to the communities. OZ business investments lag behind OZ real estate deals, but as understanding of the OZ incentive grows among the investor community, businesses are well-positioned to receive OZ investment as we emerge from the recession. Here is how states and municipalities can make the OZ incentive work toward their goals for economic development.

DEVELOP A COMMUNITY PROSPECTUS

Investors are always looking for investment opportunities that come with polished pitches and extensive background information that ties the investment into a broader development strategy. Communities with prospectuses and five to ten-year plans present as strong partners for investors looking to minimize risk. Some states and cities have OZ programs that offers grants to help communities with OZs develop prospectuses for investors. Cities and counties could use this grant funding as a launching point for impactful development opportunities.

TALK TO BUSINESSES SEEKING TO BUILD THEIR CAPITAL STACKS

The OZ incentive is complex, and businesses seeking to expand in OZs may not fully understand how to incorporate the OZ incentive into their fundraising strategy. The sooner entrepreneurs realize they may have access to patient capital, the more likely they’ll be able to reach their funding goals.

THINK ABOUT PUBLIC/PRIVATE PARTNERSHIPS

The OZ program incentivizes the use of patient capital. Communities should look into using OZ funding for long-term investments that incorporate either a long-term relationship with a private investor or some form of a buyout strategy after the 10-year investment mark. Infrastructure investments like water, renewable energy, and broadband are ideal for this kind of potential partnership.

BUILD RELATIONSHIPS WITH LOCAL POTENTIAL INVESTORS

Local investors interested in supporting their communities can have an outsize effect on development in their local OZs. High net worth residents can decide to leverage the OZ incentive to bring jobs to their community. Building these relationships is easier said than done, but if a county or city is able to reach an agreement on a public/private partnership with members of their community, they could leverage that relationship into a longstanding connection that supports community development in the long term.

These are just a few efforts to spur impact investment in the OZ world. Remember that the success of the OZ incentive does not hinge exclusively on the capital the incentive brings in. It will take a proverbial village to emerge from this recession. The OZ incentive has inspired new ways for communities to engage with investors, and we may come to find that these new conversations and relationships pave the way toward sustainable development in communities for years to come.

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