OZ's are Still Behind the Curtain: 5 Recommendations to Redesign Opportunity Zones
ICYMI the Urban Institute released a new report that analyzes the impacts of the much touted Opportunity Zone program. At Fourth Economy we work with communities trying to make the program work for them but the deal is a lot less promising than what was hoped.
The Urban Institute authors summarize their findings, “What we heard was clear: although there are compelling examples of community benefit, the incentive as a whole is not living up to its economic and community development goals. The incentive’s structure makes it harder to develop projects with community benefit in places with greatest need. In contrast, OZs are providing the biggest benefits to projects with the highest returns, which are rarely aligned with equitable development”
Without any mandated reporting on the Opportunity Zone program, it is impressive that anyone could assess its impacts. I recall being at a conference in Washington, D.C. in the fall of 2018 having a lively Opportunity Zone discussion with national community development nonprofits and advocates. In our exuberance we felt confident that we could figure out how to make the program work for communities in need, especially communities of color. Unfortunately the curtain that the OZ program hides behind has not been lifted and the programs benefits are more one sided than should be tolerated.
The Urban Institute highlights four sets of recommendations that I encourage you to explore:
Redesign the incentive to better support investments in small businesses
Size the incentive based on the impact
Broaden who can invest
Support mission-driven funds that are accountable to the community
I would add a fifth recommendation and that is to provide funding from the Economic Development Administration to local agencies that can provide deal packaging technical assistance. The underwriting, including feasibility studies, business analysis, and other investor required materials are often out of reach to the projects and businesses that could truly benefit from the OZ program.
I worry that without changes to the OZ program it will never be more than yet another federal program that widens the wealth gap in our communities. However, we will continue to work with communities to create actionable plans that attract equitable investment.