When we prepared the initial outline for The New Localism in late 2016, we included a chapter simply entitled “Blue Sky.” Our goal was to identify a series of concrete ideas for urban stakeholders — city governments, corporations, philanthropies, universities, investors — to raise and deploy large amounts of public, private and civic capital for transformative impact. What ultimately emerged was Chapter Nine, where we put forward a “provocative agenda for supporting and scaling up the most critical investments needed in cities in the areas of innovation, infrastructure, and inclusion.”
There are, of course, many chapters of this sort in many books where good ideas are presented, and then “go straight to video” (i.e., do not become realized). We are, by contrast, struck by the possibility that many of our recommendations might actually be implemented in the near term.
As many of you know, Accelerator for America has engaged us to invent a replicable product — an Investment Prospectus — that enables cities, counties and states to identify and market concrete investable projects and propositions in designated Opportunity Zones. These Zones are eligible to receive private capital that is being raised in response to the new federal tax incentive that allows taxpayers to defer paying capital gains taxes in exchange for targeted investments. Our aim is to help communities and investors get smarter and more precise about the broad range of investment possibilities that exist in Opportunity Zones and, literally, help make and shape markets where there were none. We have already begun work in three cities — Louisville, Oklahoma City and South Bend — to design and test an early version of an Investment Prospectus.
We believe that the Investment Prospectus could be a tool to spur new routinized ways of linking long neglected markets and large pools of capital and matching investor expectations with investment reality. In our view, this tool must be comprehensive in nature and focus both on enhancing labor demand and labor supply. Upgrading the skills of young adults and incumbent workers is as essential to economic success as growing and attracting businesses and developing quality residential housing, commercial real estate and mixed-use projects.
As we co-create the Investment Prospectus, we find several recommendations in The New Localism to be of particular relevance.
Innovation Districts 2.0. We recommended that “universities and others should market innovation districts as a unified investment sector, enabling more private capital to flow to the heart of city and metropolitan economies.” Significantly, the self-styled Innovation Districts in Louisville, Oklahoma City and South Bend have all been designated as Opportunity Zones by their respective states. This could accelerate the process by which these places become a recognizable asset class that like existing urban and suburban products — commercial malls, hotels, residential real estate — is routinely measured by uniform metrics and attracts capital in predictable ways.
Regional Investment Funds: We recommended that “Institutional endowments, impact investors and public entities should capitalize regional investment funds to promote business growth …” As we travel around the U.S., we are noticing serious interest in establishing Opportunity Funds that are either targeted to individual cities or multiple cities with similar economic legacies and trajectories. Imagine a Midwest Fund that could be targeted to older industrial cities that present investable projects and propositions with comparable characteristics (e.g., large mixed-use developments in central business districts or areas adjacent to downtown). Such a broad geographic base could help expand deal flow, diversify risk and enhance Fund performance.
Infrastructure Investments: We recommended that investment intermediaries be created to help city and county governments access market capital and invent and deploy a new suite of public private partnership models. We are heartened to see public and private interest in exploring whether Opportunity Funds could provide a new source of equity capital for P3 projects in Opportunity Zones, helping to close a funding gap for critical infrastructure projects. State- and local-level leadership is crucial to realizing this opportunity by coordinating procurement, project implementation, and public engagement to ensure project success.
Investments in Children: We envisioned a “national campaign led by cities and counties to reorganize educational investments based on cradle-to-career life-cycle milestones and cross-system agreements.” We believe that Opportunity Funds could catalyze a burst of social investment in STEAM (science, technology, education, arts and mathematics) education that is aligned with the distinctive competitive advantages of disparate economies and coupled with local business commitments to create apprenticeships for students who successfully complete advanced courses. This represents an incredible opportunity for city after city to adapt and adopt the most innovative efforts to expose children in secondary and even elementary schools to technological possibilities and arm them with the requisite skills.
It is exhilarating to see enthusiastic experimentation take hold in the United States during a period that is otherwise characterized by hyper partisanship and presidential narcissism. This is, no doubt, hard work ahead to bring these novel and intricate financial mechanisms and institutions to fruition. But the potential to do this at scale in rapid order is present. Let’s get to work!