February 27, 2018

Reflecting on Cross-Country Train Trips and the Potential of Opportunity Zone Investments

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Photo Credit: Millennial Trains Project

In the years I’ve spent raising “impact” capital, our field has continuously sought out new ways to bring mainstream investors to the table at scale. It’s only been two months since the Opportunity Zones Program was enacted, but early indications of investor demand have signaled that we may be there. 

While the Opportunity Zones Program didn’t originate in the community development sector, and future measurement of its success and derived social benefits may differ from our traditional definitions, the type of investment incented bears huge potential for the communities, entrepreneurs, and small businesses we passionately serve across the nation. 

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Photo credit: Millennial Trains

My hope for the Opportunity Zones Program is twofold – 
  1. That like any good tax policy, it encourages activity that otherwise would not occur, and 
     
  2. It demonstrates that, in capital-starved communities, a rising tide can (and should) lift all boats.

The Opportunity Zones Program’s main goal is addressing an uneven, post-recession economic recovery by providing equity infusions into places that have been overlooked. In earnest, the right kind of capital at the right time can be catalytic. 

For me it’s personal because, if done right, I believe that the Opportunity Zones Program can unlock the potential of people and places that remind me of my time traveling across the country in the summer of 2016 with the Millennial Trains Project

  • I think about the potential impact private investment could have on the once-thriving steel town of Braddock, PA, as I’m reminded of time spent listening to the town’s Mayor John Fetterman talk about the challenges of leading in a time when residents’ struggle to make ends meet and rebuild their local economy through creative measures.
     
  • I’m also reminded of the two hours spent wandering the Main Street in La Junta, CO - 648 miles east of Winslow, AZ and 203 miles west of Dodge City, KS - during a required Amtrak pitstop, and all the small towns we passed through during our 10-day trip. The potential for economic growth in these communities is bolstered by a steady flow of rail passengers, making them ripe for investment. 
     
  • I think about my friend Adrienne Palm - while getting ready in the morning, we would cross walk conversations about our love for Common and Mos Def with her work promoting social entrepreneurship, economic innovation, and community transformation at the Fox Cities Chamber of Commerce in Appleton, Wisconsin. It’s towns like Appleton that have the human capital in place, and just need that catalytic capital to generate a buzz.
     
  • And of course, I think about of all the entrepreneurs that crowdfunded their way onto the Millennial Trains Project trip, looking for a chance to pitch across America and raise capital for transformative ideas and products. In the same vein, I think about all the small business owners we met who intentionally invested in Pittsburgh, Kansas City, MO and Albuquerque, and as result, have become the hearts and souls of those cities. These are the entrepreneurs, small businesses, and communities that have been overlooked by traditional investors in the past, and can benefit greatly from the Opportunity Zones Program. 

The truth is that these communities, entrepreneurs, and small businesses are cut off from capital for reasons that are both related to societal perceptions and geographic barriers. At a recent event, Bill Carson of US Bank urged us to stop saying “low-income” and instead say “divested.” Investment is the main variable to prosperity; it’s both the root cause and solution to the nature of being “low-income”. 

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Photo credit: Millennial Trains

Here are a few stats that are illustrative of the link between outside investment and community/personal wealth

The Opportunity Zones Program creates an incentive to invest in communities, entrepreneurs, and small businesses that have been cut off from capital, but to truly harness the power of this program, we need to enable an ecosystem that reduces transactional friction between investors, funds, and communities so that we can delivery investment where it’s needed most.

I’d be remiss if I didn’t note that during the Millennial Trains Project, I explored the unintended negative consequences of catalytic investments – namely how infrastructure investments in historically distressed communities can accelerate gentrification and impact low-income families. This dynamic is most prevalent in places where local leaders fail to create proper frameworks through policies and programs that foster equitable economic growth and stem displacement.  

This is why Enterprise has been working hard to raise awareness about the Opportunity Zones Program, providing resources to support governors, local elected officials, and community stakeholders in strategic decision-making pertaining to Opportunity Zone designations, and outlining considerations that advance intentional investment and equitable development. 

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