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John Lettieri, EIG

November 12, 2019 Comments Off on Philanthropic Response to Opportunity Zones Remains Tepid Views: 852 Connect Classroom, National News

Philanthropic Response to Opportunity Zones Remains Tepid

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The concept behind the Opportunity Zones program, which was part of the Tax Cuts and Jobs Bill of 2017, was to funnel capital into lower-income neighborhoods in an effort to spur economic growth. But, according to John Lettieri, co-founder, president and CEO of the Economic Innovation Group, the response of the philanthropic community to the Opportunity Zone initiative has, so far, been lukewarm. Lettieri, whose organization helped create the Opportunity Zone policy, shared some of his thoughts on a recent OpportunityDb podcast, with the main aspect being that the program is still very, very new. Specifically, while the initiative has been in place for close to two years, “it is really still in the first phase as a policy, and in terms of its impact in the marketplace,” he said.

This, in turn, has meant the following:

1) Investors have been undergoing regulatory uncertainty which, at this time, is still in place. “You have final rulemaking from (the) IRS expected before the end of this year,” Lettieri said. “Frankly, until that’s done, I think a good portion of the marketplace is going to sit on their hands, and not really start to move until they have all of their questions answered.” Specifically, he went on to say, investors are being asked to put their capital gain into “higher risk and less well-trodden areas. In many cases, places they’ve never invested before.” And, he added, investors are being asked to do so, without all the rules in place.

2) Communities have been equally confused and in the dark, not knowing the next steps, or “how to organize around this new policy,” Lettieri said. Without a specific playbook or plan of action, it’s been difficult to leverage funds into meaningful purpose.

3) Philanthropic organizations have been somewhat reluctant to step up, a factor that was surprising from Lettieri’s point of view. “My perception was . . . that once this law passed, that major organizations that had the most direct and obvious stake in the well-being of underserved communities would be the first and most aggressive in stepping up . . .” That, however, hasn’t happened. He said that, while the Rockefeller Foundation and Kresge Foundation have backed the program, “The scale that has been achieved so far has been pretty minimal, when you put it against the national context,” Lettieri observed.

The result of this has been that much of the early Opportunity Zone investment has been focused on the real estate side, which includes mixed-use housing and downtown revitalization, what Lettieri indicted were the “first order of business that anchor a local revitalization plan.”

The good news, however, is that “a real proliferation of funds” is being created, while communities are putting plans in place to help handle the resources. Lettieri’s hope was also that philanthropic organizations would step into the mix.

“I would expect 2020 to be the privet year for Opportunity Zone as a market incentive,” Lettieri told podcast host Jimmy Atkinson. “So, either it’s going to bring a different scale of capital and a much wider pool of investors and stakeholders to this conversation, or it’s not. And I think we’ll pretty much know the answer to that by the end of 2020.”

Read more at OpportunityDb

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