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Feb. 27, 2019

Opportunity Zones Help Transform Low-Income Communities

CITY OF NORFOLK, VIRGINIA

The Richmond Fed's Jeanne Milliken Bonds, Drexel University's Bruce Katz, and government and community leaders look at options for financing a project for St. Paul’s District in Norfolk, Virginia.

By Laura Fortunato

Around the Fifth District, the Richmond Fed is convening with partners to discuss innovative community development financing for real estate and business development and expansion in low- and moderate-income and underserved communities. Our Community Development team has joined forces with industry professionals and tax experts to provide information and insights into a relatively new process known as Opportunity Zones.

Opportunity Zones, or OZs, are low-income census tracts where tax incentives may accrue to those who invest and hold their capital gains in Qualified Opportunity Funds that invest in the OZs. Created as part of The Tax Cuts and Jobs Act passed by Congress in December 2017, OZs are a new federal economic development tool, and the first since 2000, designed to improve the outcomes of distressed communities around the country. All 50 states, the District of Columbia and U.S. territories have designated OZ tracts from a pool of low-income census tracts.

When investors partner with institutions like universities and hospitals, as well as community organizations such as Community Development Financial Institutions and Community Development Corporations, they maximize their impact in transforming low-income, underserved communities, explained Richmond Fed’s Jeanne Milliken Bonds, senior manager, Regional Community Development.

Kenan Institute of Private Enterprise

The Richmond Fed's Jeanne Milliken Bonds and Thomas Stith, Rivermont Capital, Durham, North Carolina, talk about community engagement.

“Opportunity Zones provide for innovative approaches to financing real estate and business development in low-income communities to address significant gaps in affordable housing, employment and health care services,” said Bonds, who recently gave a presentation on Opportunity Zones during a program at the Kenan Institute of Private Enterprise, UNC Chapel Hill.

Our Community Development professionals like Bonds routinely convene business, government and community leaders to discuss issues inhibiting economic well-being in low- and moderate-income communities as well as possible solutions to help communities. They began partnering on OZ programs in 2018 not long after the Act went into effect, holding programs from Maryland to South Carolina. In the past month, they also have held OZ programs in Rocky Mount, North Carolina, and Columbia, South Carolina, an OZ program in Maryland, and a webinar for community and community reinvestment bankers in Virginia. Bonds also participated in a financing charrette for Opportunity Zones in Norfolk, Virginia.

“Creating opportunities for social investment will bring about real change and put residents on a path of economic mobility and reinforce Norfolk as a welcoming, inclusive and diverse community,” said Norfolk Mayor Kenneth Cooper Alexander.

Education and thoughtful planning are key to Opportunity Zone investing, cautions Richmond Fed’s Jeanne Milliken Bonds. Credit: Kenan Institute of Private Enterprise, UNC