In the past couple months, the national media has been replete with stories about the pitfalls of Opportunity Zones. Some stories have focused on the curious selection of robust, gentrifying areas Zones, raising the prospect that scarce federal resources will be allocated for projects that would have happened anyway and merely spark more gentrification. Other stories have focused on projects that either benefit well-off global companies or have little social value. There is even a Trump angle to explore given the real estate interests of the Kushner clan.
I am the first to admit that Opportunity Zones are an imperfect tool. The legislation, initially sold as a potential vehicle for financing start-ups and small businesses, seems most easily aligned with real estate. The tax incentives came without statutory reporting requirements or guardrails, although there are some promising moves in this direction (credit due to the network of institutions working to correct this deficiency).
Yet we have seen the “gotcha” movie before. Scandal sells in a cynical age; solutions are boring. Simple interpretations are always easier to describe in memorable soundbites (“another rip-off by the wealthy”) than complex challenges that are the product of long-standing market forces, institutional racism and policy interventions.
Media reductionism is reinforced by partisan and ideological battles. The right seized on the Solyndra bankruptcy to discredit Obama’s economic stimulus program in general and the U.S. Energy Department loan guarantee program in particular. The left views Opportunity Zones as just another example of a tax code tilted to the well-off in a system that is more likely to extract wealth than generate it. The ideologues are united by their faith in fundamentals; the real world, of course, comes in shades of grey.
Playing a game of “gotcha” has its costs. It reinforces the notion that public programs and incentives are prone to manipulation and destined to fail. It erodes trust in government, rewards skepticism and makes progress in disadvantaged communities, difficult to begin with, an almost heroic act.
Playing a game of “gotcha” is particularly damaging in the case of Opportunity Zones. The tax incentive has shined a bright light on neighborhoods that have lived in the shadow of the (incomplete) urban renaissance and renewal. These communities have received little direct assistance of any scale since the American Recovery and Renewal Act was enacted 10 years ago. They have survived with wounds — home foreclosures, abandoned commercial or industrial properties, business closures — that have never healed. Criticism of lucrative deals in prosperous communities, however warranted, is more likely to dampen public support going forward for disadvantaged places that need the most help.
So how to counter the game of gotcha?
First, we need counter stories. Research by the Economic Innovation Group and others that show the desperate condition of the preponderance of Opportunity Zones need to be highlighted. As Opportunity Funds invest, we need case studies of the “good” projects — workforce housing, commercial real estate with neighborhood businesses — that are moving forward. The Investment Prospectuses being prepared and published by localities all across the country deserve a broad audience. These Prospectuses identify investable projects that are desired and vetted by communities. Let’s give those places and projects the same level of coverage that the questionable projects in high-flying communities are receiving.
For every bad deal, we need 10 times the number of good deals. That’s how the “gotcha” game is played and it may not be enough.
Second, we need to work the problem. We should tell stories about worthy projects that don’t pencil out, even with the Opportunity Zones tax incentive. We need case studies of “can’t do” projects to help us identify where the problem lies. Lack of sufficient subsidy? Insufficient institutional capacity around financing and delivery? The absence of meaningful communication between community advocates and capital allocators? I was often told in law school that hard cases make bad law. I actually believe that the hard-to-finance projects provide teachable lessons that we need to tease out to inform federal policy, financial practice, institutional design… and all of the above.
Finally, the media needs to go to ground and immerse themselves in the places left behind. What if major print, radio or television studios spent “a day in the life” of an Opportunity Zone in Erie, Pennsylvania or Gary, Indiana or Stockton, California. What if they held community forums to bridge the gap between investors and investments? What does the community want? Are banks lending? Are local institutions investing? Let’s bring the challenge of places left behind to life.
The game of “gotcha” is an easy one to play. Making markets and getting stuff done is more difficult — messy and maddening to be sure — but its ultimately the only way to regenerate communities and build wealth.