ImpactAlpha
By Dennis Price

It's not surprising that politically well-connected bigshots would press for, and in some cases receive, special treatment for pet projects to qualify them for Opportunity Zone tax breaks.

What's more surprising is the growing number of examples in which capital chasing the Opportunity Zone tax incentives has been a lifeline for local industries affected by the trade war, a source of financing for the repurposing of blighted buildings and a way for small-town mayors to put their cities on the map. Some of those headlines:

• “Las Vegas council approves financing for major affordable housing project"
• “Vacant Detroit building to reopen with 14,000-square-foot food hall"
• “Filling in the lobster supply chain: New processing sites are keeping dollars in Maine"
• “Fredericksburg Food Co-op to create 'Opportunity Zone Fund'"

These stories of community revival contrast with the drumbeat of critical stories in national outlets, including the New York Times and Pro Publica. The watchdogs have done good work raking the muck for examples of questionable treatment for wealthy investors and campaign donors, such as Wayne Huizenga and Jeff Vinik, Michael Milken and Dan Gilbert, with projects that may run counter to the intent of the Opportunity Zone legislation.

“We see that the narrative is starting to be written already that the law is only serving those who really don't need additional help," says Tom Bartlett of 20 Degrees, a DC firm that helps impact ventures diversify revenues and raise capital. “That will be the narrative if we don't provide some counterexamples and if people remain apathetic and stay out of stay out of the marketplace."

The upside of the recent narrative that Opportunity Zones have been a giveaway to the rich is that Congress may be spurred to act on legislation to beef up Opportunity Zone regulations, for example by requiring greater reporting and transparency and prohibiting self-storage facilities and luxury housing from qualifying for the tax breaks (see, “Congressional Democrats push for fixes to Opportunity Zone tax incentive").

The downside is that the anecdotal evidence of special treatment may squelch enthusiasm for Opportunity Zone projects and undermine the marketplace before high-impact, community driven projects get off the ground.

“Information makes markets," says Kenan Fikri of Economic Innovation Group, which is literally putting innovative, high-impact deals on the map. EIG's Opportunity Zones Activity Map rounds up dozens of local and impact-oriented funds, deals and initiatives, including many reported in ImpactAlpha. The think tank, which pushed to pass the tax incentive, wants to increase the flow of information on deals, innovative models and use cases.

“The Opportunities Zone market is forming and it's looking really good," says Fikri. Read more.