Wednesday, November 28, 2018

Boon or boondoggle? Jury out on Opportunity Zones

Dark blue census tracts in Johnson City, Tennessee represent areas
of economic distress that aren't Opportunity Zones. That doesn't lessen
the need of residents there, nor ACFCU and partners' commitment.
“Boondocks and boondoggles,” indeed. This article in the latest issue of The Economist takes a closer look at “Opportunity Zones.” Created through the 2017 Tax Cuts and Jobs Act, Opportunity Zones (OZ) offer favorable tax status on unrealized capital gains if those gains are invested in OZ-designated census tracts.

Like “Enterprise Zones” and other well-meaning concepts that preceded them, OZs purportedly are designed to draw investment capital into economically struggling areas. That’s one reason Appalachian Community Federal Credit Union (ACFCU) helped drive the effort to establish OZs in appropriate census tracts within Northeast Tennessee’s eight counties.

As a mission-driven financial institution, ACFCU sees firsthand the overwhelming need for action and not just words when it comes to alleviating poor economic conditions in overlooked, underserved areas. “Opportunity” aptly describes an actual concrete thing that is sorely needed in many neighborhoods and census tracts in Northeast Tennessee and ACFCU’s other service areas of Southwest Virginia and Southeast Kentucky.
ACFCU provides opportunity here in rural Kentucky, where Opportunity
 Zones are in light blue and regentrification is just a really long word.

Yet as we have seen this fledgling concept evolve toward reality, some of us at ACFCU have developed the same concerns expressed in the Economist article. Plenty of OZ census tracts are experiencing pockets of regentrification. If capital linked to this program primarily flows into those areas, that concern will prove to have been justified as, per the Economist, “investors will pocket tax rewards for investments that they would have made anyway.”

As ACFCU’s Regional Community Development Coordinator, Adam Dickson, aptly noted, “the more I get into understanding OZs, the more concerned I am that the initial intent of the program is profit with limited regard to the interests of low-income communities.” Dickson also insightfully points out that, “OZs provide a prime opportunity to promote social enterprise, cooperatives, etc.”

Time will tell whether the areas most in need of opportunity benefit. The Economist noted that “place-based policies” are theoretically attractive, because many poorer parts of America find it increasingly difficult to catch up with wealthier ones. “In theory, geographically targeted tax cuts or subsidies could encourage new clusters of economic activity to form, thereby lifting depressed places,” the article states.

Will capital flow to Opportunity Zones like this tract in Kingsport,
where regentrification isn't likely in the cards? The need is obvious.
The Tax Policy Center’s Brett Theodos, Steven Rosenthal and Brady Meixell expressed similar concerns in a blog post published Oct. 23 after the feds released their first set of proposed OZ regulations.

ACFCU and its many partners will continue bringing opportunity to economically challenged areas that need it most and are unlikely to attract investment. Some of those areas are in Opportunity Zones, and ACFCU continues to lead efforts to bring OZ-eligible capital to such neighborhoods.

But we won’t wait to see how the new program turns out. We’ll try to steer a potentially impactful program in the right direction in our communities, including at an upcoming ACFCU-sponsored Opportunity Zone symposium, but we won’t pin our hopes on something that could, indeed, turn out to be a boondoggle. So I’ll take a slightly different tack than the Economist, which writes that when it comes to OZs, “for the moment, scepticism is in order.” Here in the mountains of Central Appalachia, where declines in coal and manufacturing make economic opportunity as badly needed as it’s been in a long time, I share my colleague Adam Dickson’s concern. But like Adam, I’ll choose “guarded optimism” over skepticism. After all, as folks like to say around here, “you can catch more flies with honey than you can with vinegar.”

 (Jeff Keeling is director of community relations for Appalachian Community Federal Credit Union.)

No comments:

Post a Comment

Tech bringing financial opportunity to hills and hollers

Anthony Price had a problem. Like a number of Owsley County, Kentucky residents, Price travels for work. “Unless you work for the school ...