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The real opportunity in Opportunity Zones

Kansas City, Missouri

Collaboration – including purposeful engagement of community and entrepreneurs – is essential to achieve the full potential for economically distressed areas designated to benefit from tax reform.

$6.1 trillion in capital gains taxes.

That’s the eligible capital available for reinvestment in economically distressed areas thanks to a provision tucked inside last year’s tax reform package.

It’s easy to get distracted by the big numbers related to these “Opportunity Zones” – areas designated by governors of all 50 states for being economically disadvantaged – and not focus on the ambition and intent of the legislation put forward by the Economic Innovation Group: transformation that benefits distressed communities.

On Friday, the U.S. Treasury Department released long-awaited guidance for Opportunity Zones implementation. Many interested parties, from real estate attorneys to community-based organizations, spent the weekend pouring over the information that could unlock a significant portion of the $6.1 trillion.

As we wrote in February, March, and again in July, this is all potentially good news for our most challenged census tracts.

But – and that’s a big ‘but’ here – only if the community and entrepreneurs are deeply engaged in the dialogue as this investment unfolds. Otherwise, we will get what we’ve always gotten in these types of zones – some block-by-block real estate development that benefits a very few.

A collaborative opportunity

In Kansas City, the Urban Neighborhood Initiative (UNI) and Greater Kansas City Chamber of Commerce are working to convene an inclusive and collaborative dialogue focused on improving the livelihoods of the people living and working in Opportunity Zones, with the goal of helping our entire community reach its full potential.

The city of Kansas City is also a critical partner in this dialogue. The city was strategic in the zones it recommended to Missouri’s governor as part of the Opportunity Zone selection process. Thankfully, many of those recommendations were taken. Community-driven organizations that partner with UNI have been hard at work since the selection of the zones to develop a process that can use the potential of private investment to work alongside both city and philanthropic funding. There’s energy and potential.

However, the first step in harnessing that potential is getting basic agreement on the facts and circumstances of each identified zone. That includes assets and gaps that currently exist in communities; detailing current and planned neighborhood and community investments, philanthropic investment, and private investment, but also many indicators such as crime statistics, unemployment rates, and educational opportunity per zone. Agreement on the facts helps provide a foundation for our community to think through what long-term strategies need to be present in each zone and how to best engage residents in that conversation.

With funding and support from the Kauffman Foundation, during the next few months UNI and the Chamber will be working with national and local experts, as well as our community, to assemble clear information for an investment prospectus and to develop a process that pushes beyond transactional to transformative. To do that, our community must adhere to clear principles dedicated to the big picture, ensuring inclusion amongst all stakeholders, and ultimately using Opportunity Zones to better organize needed investments in these tracts.

Although the potential tax advantages are very lucrative, and the potential investment is high, transformation only happens if we are clear-eyed and focused on listening to the community, and working alongside the community, to ensure more economic success for those who live and work in the zones.

The Kauffman Foundation is committed to supporting this local dialogue with our partners and will continue to bring in national thought leaders to inform our local action.

We’d like to hear from you on how we should be approaching this “opportunity” so that more people benefit. Tell us what you think in comments below.