Once upon a time, a family purchased a “gently used” home. They loved it, but immediately began making plans for improvements and expansions. They dreamt about making the home more welcoming to guests, more comfortable for themselves, and more appealing should they ever want to sell it in the future. As the list got longer, and the dreams got bigger, the family quickly realized there was no way they could fund all their plans. The family then prioritized the list and began working on projects as they could afford them.
Then one day, a magical fairy godmother appeared out of nowhere and said all their home improvement dreams would come true. She promised a list of people eager to pay for the home improvements as long as the family agreed to share some of the profits should they sell the house someday. The fairy godmother said she would only bring investors who promise to increase the home’s value and she also promised the family would be in charge of the vision for the project.
The family wondered … “Is this real life?”
So here we are. Montrose, Colorado. Poised for growth, full of potential and more ideas/projects than resources. Just like the family in our fairytale. Wouldn’t it be great if Montrose had a fairy godmother too?
This fairytale is closer to reality than not. The federal government has released a tax incentive program predicted to be the most powerful economic development tool we’ll see in our lifetime. The program essentially pairs low income census tracks (opportunity zones) in need of redevelopment with high dollar investors. It gives investors unbelievable tax breaks as an incentive for investment, but also requires they develop the project into something far more valuable than it was before.
We all have a role, should we so choose, to play in opportunity zones. Maybe we invest, maybe we are invested in, maybe we help navigate, or maybe we are part of visioning what this community can become with careful attention to detail. The creators of this program designed it to be as friendly to as many players as possible.
But back to our fairytale….
“Is this real life?” Wonders Montrose (and the rest of the country).
“Yes,” the fairy godmother says, “but you (the community) must do five things if you want this wish to come true”….(adapted from choosecolorado.com/oz)
1. Be proactive — The best way to ensure that your community attracts the investment it would like is making your projects the most attractive and the easiest to find. If you do not take a seat at the table, investment will happen to your community instead of with your community.
2. Urgency is key — To realize the full benefits of the incentive, an Opportunity Zone investment must occur before the end of 2019. While OZ investments will continue after this date, communities and projects that organize themselves quickly will have an easier time attracting capital.
3. Think like an investor — The Opportunity Zone incentive will not make a bad project good, but instead will help bring a good project over the finish line. Focus on projects that will help investors realize a return, and consider what your community can do to increase that return even more.
4. Layer additional programs and incentives — In the right situation, Opportunity Zone incentives can be used in conjunction with Enterprise Zones, New Market Tax Credits, TIFs (tax increment financing), LIHTC (low income housing tax credits), land donations, fast-tracked permitting and many other programs. Consider what else your community can add to make a desired project as attractive as possible to investors.
5. Opportunity zones are another tool in the toolkit — There will be some projects that are not well-suited for Opportunity Zones, or problems that Opportunity Zones can’t solve. Think about how Opportunity Zones can fit into your existing economic development tools, because in the right situation, the incentive can be catalytic.
Doesn’t this sound exciting? The City of Montrose is in the process of getting our prospectus (the document describing who we are and what we want to become) formulated. Not all of Montrose is part of the census track that has been selected as an Opportunity Zone. This gives us an opportunity (pardon the overuse of “opportunity”) to more narrowly focus our efforts. Fortunately, the Colorado Outdoors Project as well as Main Street are included in our zone. We are acting as quickly as we can so we are able to attract the best investment possible.
“The promise of Opportunity Zones is not just to match private capital to investable projects but to inspire cities to reexamine and rediscover the fundamentals of economic development for all by channeling the resources of their own communities. Cities who are able to coordinate and focus investment will drive not just growth in the near term but institutional and financial reforms that will reposition cities for success over the long haul.”
-“Transactions to Transformation: How Cities Can Maximize Opportunity Zones” By Bruce Katz and Evan Weiss
And we all lived prosperity-ly after.
Chelsea Rosty is the director of business innovation for the City of Montrose. She can be reached at firstname.lastname@example.org.