Impact in Action

Oregon Opportunity Zone Initiative

The Opportunity Zone (OZ) Program is a new tax incentive within the Tax Cuts and Jobs Act of 2017, intended to spur long-term investments in low-income census tracts in the U.S. The new law allows investors to place unrealized capital gains from the sale of an asset into Opportunity Funds (O Funds) that invest capital into designated OZs. The greatest tax benefits would go to investors who invest for 10 or more years.
 
As the OZ program moves from idea to implementation, foundations are playing an important role in monitoring and protecting social impact, fostering dialogue, creating space for community-based wealth creation, and working to bring capital to areas of greatest need. Read below about a collaborative project unfolding in Oregon, with the support of The Ford Family Foundation, Meyer Memorial Trust, and Oregon Community Foundation. This project overview was written collaboratively by the three foundations, Mission Investors Exchange, Pilot Management Resources, the Affiliated Tribes of Northwest Indians Economic Development Corporation, and the Mid-Columbia Economic Development District.
 
To learn more about the program, please see MIE's evolving OZ LibraryIf you have a project to share, please fill out this poll to share more information.
 

 

Project Overview

Three foundations in Oregon, Meyer Memorial Trust, the Oregon Community Foundation, and The Ford Family Foundation, are collectively pursuing an initiative to help ensure that capital from Opportunity Funds (O Funds) are targeted to rural and underserved communities throughout the state.  
 
This Initiative is designed to create a platform or clearinghouse for the state of Oregon that bridges the gap between projects in need of investment and O Funds. By developing an inventory of local projects and informing O Fund managers about the projects that are ready for investment, the Initiative sponsors hope to: (1) ensure that capital flows where it is most needed, and (2) capture data on Oregon's impact investing opportunities. Additionally, this framework can offer the tools to coordinate and deploy appropriate resources and technical assistance to projects that may not be ready for investment.
 
Oregon is organized geographically into 11 economic development districts and includes a regional organization that promotes economic development for Oregon Tribes. In addition, the Affiliated Tribes of Northwest Indians Economic Development Corporation have a development district “overlay” for tribes in the Pacific Northwest. Existing state, regional, tribal, and local economic development agencies in these districts serve to focus community development resources and promote local outreach and coordination.  Through this existing local infrastructure, the Initiative hopes to establish uniform processes to communicate with and solicit projects from local stakeholders and project sponsors, while also analyzing aggregate project data. The processes will also involve classifying projects by type (e.g., renewable energy, industrial lands, commercial real estate, etc.), reviewing projects for investment readiness, and presenting projects to appropriate Fund managers for due diligence.
 

Collective Goals/Intended Outcomes

Without further infrastructure for organizing and managing potential deals in Oregon, we believe that very little investment will find its way to projects and regions in need:
  • High-impact projects may not be in regions where O Funds are likely to form. Major metropolitan areas are more likely to attract investments, even though individual projects have less relative impact. In comparison, individual projects have relatively greater impact in rural areas, but their smaller number and relatively higher risk deter interest from Fund managers. 
  • The investments that may occur in Opportunity Zones (OZs) may not be made with concern for actual community needs, resulting in further gentrification of low income urban areas.
By developing an aggregated inventory of deals, facilitated by knowledgeable community agencies with strong local relationships, we can create a fairer marketplace and bridge the divide between funds and investees outside of traditional or known networks.
 

Project Investors/Funders (as of 8/22/18)

Org or Individual
Goals (if additional to collective goals)
Type of financial contribution (eg, PRI, grant, equity, etc)
$ contributed
Non-monetary contribution if applicable
Expert
Ford Family Foundation
Rural Focus
Fee for Service
16,666
Personal time  - oversight
Kathleen Flanagan
Meyer Memorial Trust
Economic Equity
Fee for Service
16,666
Project coordination
Sayer Jones
Oregon Community Foundation
Statewide Distribution
Fee for Service
16,666
Personal time - oversight
Melissa Freeman
 

Project Consultants (as of 8/22/18)

Org or Individual
Type of consultation (eg, strategy, evaluation, technical)
Expert
Pilot Management Resources
Strategy, program design, research & outreach, stakeholder coordination & collaboration
Stephen Brooks
 

Key Milestones to Monitor

Target launch date for the online marketplace is early 2019. By late fall, we plan to:
  • Develop uniform processes and procedures for training, community outreach, project solicitation and identification, project information management and reporting, and technical assistance to develop the marketplace.
  • Identify and secure access to (and likely modify) an existing online platform that will provide the necessary capacities for our program.

Additional Stakeholders                                       

We began this project in June by conducting intensive research, outreach, and communication with  investment fund managers, businesses, developers, economic development agencies, community development corporations, and investors such as CDFIs that had an interest in the OZ program. Our aim was to understand the potential scale and scope of the OZ program and to identify a “value added” approach that could target investment capital to target areas.  
 
As the project enters development, we plan to establish consistent statewide processes and procedures for identifying, collecting relevant information on, and reviewing projects and investments in rural and underserved communities. After the project launches, we will support the active management of this system, and use the data collected to inform further efforts to support Oregon’s rural and underserved communities.
 
Stakeholder Organizations Engaged
Type of Organization
Oregon Regional Solutions Team
Government agency
Business Oregon
Economic development agency
Oregon Governor’s Office
Government agency
Oregon’s Economic Development Districts
Economic development agency
US Economic Development Administration Regional Office
Government agency
Oregon manager of USDA’s Rural Economic Development department
Government agency
Prosper Portland
Economic development agency
Greater Portland Inc.
Economic development agency
Economic development managers for Clackamas County, Lane County, and Deschutes County
Economic development agency
Ecotrust Forest Management
Private Equity fund manager
Community Investment Management
Private Equity fund manager
Seven Peaks Ventures
Venture capital
Craft3
CDFI
Enterprise Community Partners
CDFI
Mission Investors Exchange
Field Builder/Network
Kresge Foundation
Foundation
Walton Family Foundation
Foundation
Rockefeller Foundation
Foundation
Oregon Economic Development Association Economic development association
 

Noteworthy Characteristics of Oregon's OZs

There are 342 low income census tracts in Oregon. As a predominantly rural state, over 50% of Oregon’s overall low income tracts are in very large, relatively underpopulated counties.
 
Oregon selected a total of 86 low income census tracts (including bonus tracts) as Opportunity Zones. Among the 86 OZs selected, 17 are in the State’s most populous county, with 8 of those OZs located in the downtown Portland core. Another 15 OZs cover suburban communities within the Portland MSA. These OZs should attract significant additional capital for urban redevelopment.
 
Meanwhile, over half of Oregon’s OZs are in rural areas — both on the Oregon coast and in the eastern part of the state. In one case, an entire county is a single OZ.The location of rural OZs— combined with a concentration of Opportunity Zones in Portland’s downtown core— increases the likelihood that most O Fund investments will flow to downtown Portland, rather than the rest of the state.
 

Lessons Learned

  • Education is still needed on the OZ program (eg., tax benefits, distinctions between OZ funds and individual investors, exclusions and general information)
  • Predictions for inflows of investment are difficult to make, until systems to organize funds and deals are developed
  • Areas of focus for investment in Oregon appear to be in commercial real estate investment or construction of facilities, such as renewable energy, facilities expansion, etc. Less interest to-date appears to be in operating businesses. Each region will likely encounter different focuses, opportunities, and challenges.
  • Maintaining deal flow and sustainable funds in Oregon is a concern: Once the easy deals — the ‘low hanging fruit”— are spoken for, there is uncertainty about how a fund can identify investable projects. Relatedly, how will funds identify projects in later investment rounds, maintain assets, and balance deals against available assets?
  • Community stakeholders and organizations (eg CDFIs, affordable housing organizations) may be early in forming strategies to take advantage of the program in Oregon.
  • Affordable housing projects will face difficulty attracting OZ Fund capital due to the economics of privately financed multifamily development.

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