POLITICS GEOGRAPHY
Opportunity Zones: A Marriage of Entertainment and Economy
By Connor Judson Ga r re t t most investment comes from government and charities. That model has had modest success over the last 50 years, but the impact of the Great Recession 10 years ago, coupled with huge changes in the tax code over the last few decades, have limited the effectiveness of public and philanthropic dollars alone. We need private capital to stimulate the growth of new businesses and new jobs that can be transformative for these communities.” The Opportunity Zones initiative was accepted as a bipartisan solution with champions on both sides of the aisle. Today, these zones have already attracted at least 80 million dollars to the state of Georgia, which has been poured into 260 designated Opportunity Zones. Atlanta is home to ten percent of Georgia’s OZs with twenty- six. Glickman serves as an advisor to Areu Bros., the first Latino-owned and operated major studio in North America. Not coincidentally, Areu Bros. was also one of the first companies in the state to capitalize on the incentives, working to transform it into a global studio, which highlights the stories of Women, Latinx, and all communities who are underrepresented in entertainment. The entire campus is built in areas that have a need for stimulus and is just one of hundreds, if not thousands of success stories from across the country. “It took five years for Opportunity Zones to get from idea to law, which is lightspeed for new national policies. After we founded EIG in 2013, we went into stealth mode for two years to assess how to make this concept politically viable for both Democrats and Republicans. We publicly launched in 2015, and the legislation was first introduced in 2016. It took only a year and a half for it to be passed by Congress. Republican Senator Tim Scott and Democratic Senator, and now presidential candidate, Cory Booker were two great champions of the program, which was ultimately supported by nearly 100 Members of Congress,” says Glickman. “Congress widely understood that access to capital is the lifeblood for new business creation, and to give just one example, nearly 80% of venture capital is invested in just three states. We explored the impact of that lack of dynamism in economically distressed communities, and our research demonstrated how the resulting economic inequality affects life expectancy, suicide rates, and opioid addiction, so it’s not just an economic problem — it contributes to a growing social and political crisis in America.” Conservative estimates from early data show about 10 billion dollars have been invested in Opportunity Zones since April when the Treasury Department released the full set of regulations, which means that Opportunity Zones are the largest economic development program in the United States.
“The second biggest community development program is the New Markets Tax Credit. It’s been around for 20 years and supports 3.5 billion in tax credits per year. Opportunity Zones are already three times as large and growing significantly every year. You’re going to see far more investment in, not just real estate, but also businesses across a variety of industries. Areu Brothers Studios is a great example of how a business can scale using Opportunity Zone capital. They can raise a large amount of money quicker,” says Glickman. “And because for successful business investments, your return on investment can be much bigger than in real estate, I think that’s going to encourage new investments in operating businesses in these communities around the country.” Nationwide, there are nearly 300 OZ funds, targeting approximately 70 billion dollars of capital. “The concept of ‘place-based value investing’ is an important thing for investors to consider. This means taking a long-term view on investing, particularly in communities that have been neglected for long periods of time, as their infrastructure and assets have aged and depreciated in value. It may prove smarter to think about making investments in places in the middle of the country where the assets are cheap, and you can be patient. The early evidence is that disproportionately, cities that were behind the curve are growing tremendously. Baltimore and Birmingham are amazing success stories. Baltimore has seen nearly 900% growth and Birmingham has seen 650% increase in investments in their Opportunity Zones. Cities that have been underinvested in like Philadelphia (500% growth), Detroit (200% growth), and Atlanta (50% growth) are now securing a lot of that patient capital,” says Glickman. “Keep in mind that we’re in the first inning of a ten-year program. Many of these areas are blank canvases for real estate, infrastructure, tech startups, coworking spaces, you name it. Atlanta is one of those cities that’s been aggressive on this. They’ve set up an Opportunity Zones office. This is not a program where you want to be a passive spectator. The cities that successfully use this program to get investors to fly from New York City and San Francisco can really move the needle on revitalizing these communities. Investors have a long runway – they can make new investments into the program through the middle of 2027. Then, it’s up to Congress to decide whether to extend the program. The idea is that Congress can then pick new zones based on which communities are economically struggling when there is updated Census data.”
Steve Glickman
S teve Glickman, senior economic advisor in the Obama Administration until 2013, turned his attention to generating opportunities in distressed areas of the United States. As the CEO of the bipartisan think tank, the Economic Innovation Group, Glickman along with Napster’s Sean Parker, were the two minds that melded to come up with Opportunity Zones. “Opportunity Zones were created out of the simple idea that we could more effectively use the tax code to provide investment incentives to attract private capital to low-income areas,” explains Glickman. “The concept was born out of work I did in the Obama White House, working to strengthen manufacturing communities struggling to keep up with the sea change of the digital revolution. Additionally, Sean’s experience as a philanthropist helped us understand the limitations of well-meaning charitable dollars for low income areas. Given the staggering economic inequality that exists within and among American cities, we knew this was a problem that had to be addressed quickly and at scale. Traditionally, when you think of economic development,
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