Michael Best Strategies hosted an invitational briefing for clients and community partners in January to dig into the emerging Opportunity Zones (OZs) program.
Created by the federal Tax Cuts and Jobs Act, the opportunity zones program is a combination of identified places (low income census tracts designated by governors in all 50 states and in US territories), rules for the establishment of Opportunity Funds with substantial tax incentives for investors, and rules that guide investment by Funds into certain kinds of Opportunity Zone property and projects. Our colleagues at Michael Best have prepared a great overview of the program that can be found here.
More than 8,700 Opportunity Zones have been designated across the United States, including 120 in Wisconsin.
What’s the Opportunity?
The purpose of the program is to drive investment in communities that have lagged behind other parts of the state and nation in economic development and income growth. It sounds straightforward, but doing this successfully, in ways that meet the goals of the program’s sponsors as well as the governors who made the Zone designations, requires more than just publishing maps of Zones and hoping for the best.
Michael Best Strategies is following interesting developments at the state and local level to see how governors and city and county leaders are capitalizing on this program to benefit their states and local communities.
In Michigan, for example, new Governor Gretchen Whitmer has assigned an Executive Directive that seeks to expand the state government’s purchasing of supplies, materials, financing, and other goods and services from Geographically-Disadvantaged Business Enterprises located in Opportunity Zones, including businesses more than half of whose employees have their primary residence in an Opportunity Zone.
This strategy directs the economic power of state government toward areas of the state that are in need of additional activity. By targeting businesses not simply by their location, but by considering the location of the employees of that business, the Executive Directive is designed to push economic activity through to employees and families in communities, a good fit with the criteria governors used to designate OZs (including percent of families living in poverty or median household income that is below 80% of the median income in comparable communities).
Local communities are beginning to aggregate and position their OZ projects to attract investment. Erie, Pennsylvania has been receiving high marks for its Opportunity Zone Prospectus.
Finding a match between investors and Opportunity Funds, and projects in Opportunity Zones, requires vision, strategy, and hard work. Erie’s approach highlights the why, as well as the what and the how, of investing in Erie, showcasing key features about the local:
- Demographics, including workforce characteristics and trends
- Local economic trends
- Anchor institutions – public and private sector major employers including higher education, health care, and non-profits
- Local economic development strategy, including related incentives
For more information on how Michael Best Strategies can help establish Opportunity Funds, identify projects, and build local, regional and state support, contact any of us on our Opportunity Zones team.