Erin Gillespie: A Community-Driven Approach to Opportunity Zone Investing

Erin Gillespie

What types of opportunity zone investments are community leaders looking for? And what can local communities do to incentivize investment in their opportunity zones?

Joining me on the podcast to discuss these topics and more is Erin Gillespie, principal at economic development consulting firm Madison Street Strategies and former deputy chief of staff for Florida’s Department of Economic Development Opportunity. In her former role, Erin worked closely with Governor Rick Scott in deciding which census tracts were nominated in Florida, so she has unique insight into the program.

Click the play button below to listen to my conversation with Erin now.

Episode Highlights

  • The strategy behind Florida’s opportunity zone nominations.
  • What a community-driven approach to Opportunity Zones investing looks like.
  • What local communities can do to incentivize investment in their opportunity zones.
  • How public-private partnerships can help develop infrastructure in opportunity zones.
  • The types of investment that community leaders are looking for.
  • Where initial opportunity zone investments are flowing.
  • What Erin and Madison Street Strategies are doing to promote Opportunity Zones awareness and education.
  • How Opportunity Zones can work hand-in-hand with disaster recovery efforts, particularly in Florida areas hit hardest by Hurricane Irma (2017) and Hurricane Michael (2018).

Featured on This Episode

Industry Spotlight: Madison Street Strategies

Madison Street Strategies

Founded by Erin Gillespie last year, Madison Street Strategies is an economic development consultancy that advises small businesses, investors, local communities, and government entities on Opportunity Zones. Their experience in disaster recovery and government provides them with the ability to help their clients access funds from state and federal resources.

Learn More About Madison Street

About the Opportunity Zones Podcast

Hosted by OpportunityDb.com founder Jimmy Atkinson, the Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in opportunity zones.

Show Transcript

Jimmy: Hey, it’s Jimmy Atkinson back with another episode of “The Opportunity Zones Podcast.” Today I’m joined by Erin Gillespie, principal at Madison Street Strategies, an economic development consulting firm specializing in opportunities zones and disaster recovery. Erin has a unique insight into the opportunity zone program, having previously worked as deputy chief of staff for the Florida Department of Economic Opportunity. She worked closely with former Governor Rick Scott, and was one of the decision makers when it came time to nominating Florida’s opportunity zones. Erin joins us today from her office in Tallahassee, Florida. Erin, welcome to the podcast.

Erin: Thank you so much for having me.

Jimmy: Absolutely. I’m glad you’ve joined us today. But I wanna ask you about Madison Street Strategies. But before we talk about that, I actually wanna talk with you about your time with the state of Florida because you had a hand in actually deciding which census tracts got selected as opportunity zones. So I wanted to know from you, how did you determine which census tracts were nominated? What was Florida’s overall nominating strategy and how closely did you work with local community leaders?

Erin: Sure. Well, yes. As you know, the governor of every state had the opportunity to nominate 25% of the state’s low-income census tracts as opportunity zones. And Florida at the time…Governor Rick Scott, who is now Senator Rick Scott, designated our agency, the Florida Department of Economic Opportunity to do the analysis and help nominate the zones. And as the Deputy Chief of Staff there I lead the effort for the agency.

So we did two things, really. The first, we made a couple of decisions. The governor asked us to make sure that every county in Florida had at least one zone and he asked us to look at unemployment rates. Our former governor, his main priority was job creation and so he wanted to look at unemployment rates as one of the main criteria to determine the zones. So we did an economic analysis on a proportional method so that every county would receive at least one zone. And we looked at poverty levels. Of course, being low-income census tracts, we had that economic data. We looked at population as well, unemployment rates, and some other economic indicators to take sort of the first cut of the 427 zones that Florida was able to nominate.

And then we took community input. So over the course of the 90 days that we were able to select the zones, we had requests for more than 1,200 zones. And of course, we could only choose 427. And we listened to the people on the ground in Florida. So our state is very large. We have a very diverse and unique set of communities and we know they’re our rural communities, our Metro communities, our cities and counties, have very different thoughts about their economic development. And at the state government level, we don’t know the answers to everything. And so we really weighed that community input very heavily. We listened to what the community had to say and we weighed that against the economic analysis to make sure that we were picking the zones that needed the most help. So we had input from county and city-elected officials and appointed officials. We had input from investors and developers who were working on the ground in these communities already. We received input from banks, from nonprofits that were working in some of these low-income areas. Really across the board. And we listened to all of them.

We did our best to meet everyone’s expectations and to make sure, again, that the community led the effort for which zones that were chosen and their neighborhoods. And that and the economic analysis, Governor Scott nominated our 427 zones and they were all certified by the Department of Treasury.

Jimmy: Very good. Well, thank you for providing some of that insight into what all went on when it came time to choosing those. I think you’re the first guest I’ve had on the podcast so far who actually had a hand in selecting the zone. So that’s very good to know some of that background level of detail there. So it’s very impressive what you’ve done for the governor there in Florida and you have a lot of credentials, but give me some more of your background. How did you get to where you are today and where did your passion for economic development and disaster relief come from?

Erin: Yeah. So my trajectory has been interesting. Most of my career has been in communications, media relations, crisis management. I worked at three different state agencies over the course of my career. I also worked directly in the media as a newspaper reporter. I’m also an adjunct professor at Florida State University. So it’s quite a diverse background. For the last four years, I’ve worked in economic development. I started as the Communications Director for the agency and worked up to Deputy Chief of Staff. And I think the passion really came from my work as a public servant. Most of us in government do it because we care and we have a passion for what we’re doing. And across the course of the agencies I worked in, I was able to really work with communities and with individuals across our state and really see the innovation that’s happening across Florida along with the need across the state.

And so the opportunity zone program really was a mix of those two things really, right? You’re looking at communities that really need extra help. Our far State in Florida has grown tremendously since the recession, but there are communities and pockets of communities if you look at census tracts that still have very high unemployment rates that still have very little access to education and to employment. And so we know that those communities need more help and opportunity zones was a way to join that passion for working with our communities and helping those in need across the state and that’s something I’ve been fortunate to do in my entire career in public service.

Jimmy: Good. Yeah. The economic recovery has been very uneven as you know across the country and across the state of Florida, I’m sure, as well.

Erin: Well, and you know Florida is unique in that the recession lasted longer in Florida. It started sooner, lasted longer. It took us longer to recover. The recovery has been tremendous mainly because of the focus that our state government has had on promoting the private sector, making sure that our private sector led the way, that we could reduce unemployment, increase the number of jobs available to Floridians all across our state. So it’s been incredible to see but we’ve also had challenges. We’ve had major hurricanes, other issues. In the last 18 months, every county in Florida has had a designated federal disaster through Hurricane Irma and Hurricane Michael. And so although the state is doing good as a whole, there are many communities that still face challenges for a variety of reasons.

Jimmy: I’m sure. And you’re in the private sector now. You’ve transitioned from the public sector to private sector, starting up your own consulting firm at Madison Street Strategies. So I wanna ask you a little bit about that. First of all, who are your clients? Who is coming to you? Is it real estate developers who have a project and they’re looking to set up a qualified opportunity fund? Is it fund sponsors who are looking for projects? Is it individual investors? Is it community leaders? What’s the breakdown there? What does it look like?

Erin: So all of the above. Pretty much everyone you named we’re working with. When we founded the company, it was really with the strategy and the mission to help communities. That community-focused development which I know we’ll talk about a little bit more in detail is really gonna be the key to making sure that our communities in Florida get what they want out of this program. But what we’ve seen is that investors and developers in the private sector really have a need for assistance as well. There’s such a gap in education on the opportunities on the field right now with it being so new and the guidance not being fully developed that many people just need to know more information. And so we have really deepened our bench on the communication side, educating people, whether those are developers or investors or communities and working to try to get people what they need. And what I mean by that is, if a developer comes to us and says, “I have a project. I’m looking for an investor or a fund to connect with,” we want to be able to do that. If a developer comes to us and says, “I have a project and I wanna create my own fund,” we wanna be able to help them do that.

On the community side, we wanna help communities create their vision and market that vision to investors and developers so that having that tie in between the investment community and the local leaders on the ground will make the program more successful. So we’re really working across the board with that on a daily basis and we see great success across Florida as people are learning more about it, moving into the space, and trying to make sure that our communities are really going to get what they want.

One of the major ways we’re doing that right now is we’re hosting a variety of workshops across the state. The state agency, when we were part of it, we hosted a 400-person conference in Orlando in December to bring together all the major players and opportunity zones and educate folks about where this was going, how to make the connections and relationships they needed to make it successful. And many communities came forward and said, “We want a workshop similar to this but based on a local level.” And so we are working… In March, we’ll have a workshop in Tallahassee. In April, we have one in Miami. And we have some other cities coming online to do similar workshops. So not only can we continue educating people as the guidance comes out, but we can also make those connections between the developers and the investors and the communities on the ground in the local level so they see each other’s faces, they learn who the players are in their community and can work together to drive the community’s vision.

Jimmy: Good. Yeah, it’s important to know who you’re working with locally. So those local workshops I’m sure will be quite the boon for the attendees there. So you mentioned that you had started Madison Street Strategies with community development in mind and now you’re kind of taking on other types of clients. But I wanna talk with you more about that community-driven approach to opportunity zone investing. You mentioned that term when we spoke on the phone a few days ago. Can you explain what you mean by that and how may that approach differ from the approach that others are taking?

Erin: Sure. Well, as you know, opportunity zone, the legislation that came down really provided no role for the state or local government or community in the program itself. So the government involvement is really limited to the investor and the IRS. If you create your own fund, report it to the IRS, report your income, follow through with the details of the financial regulation. There is no involvement at the state or community level that’s required. And although we very much believe in reducing bureaucracy and making sure that this program can be successful without a lot of government involvement, we also know that these communities on the ground, again, they know best for what they want and what would make their community successful. And we think that we can make these connections happen so that the investors and the communities can work together so that they both feel like they have a successful project that means a lot to the community. And so we’re really encouraging communities to follow the lead of…you’ve seen cities like Erie, Pennsylvania and Louisville, Kentucky that have put together these prospectuses to share the vision for their community. And they will bring in investment that will match that vision.
Now, there will be other investment in communities that, again, we won’t necessarily hear about because it will be limited to the investor and the IRS as far as reporting goes at this time, but the successful projects, I think, take a community partnership. Even though there isn’t any specific role for the community in the opportunity zone legislation, obviously, cities and counties are gonna be dealing with permitting and zoning and all of the other requirements that it takes to develop projects, at least on the real estate development side. And so making sure that communities have a vision for what they want will ensure that they bring in successful projects to lead them forward. And it’s different for every community. We deal with very rural communities here in Florida. We have very urban metro areas here in Florida. The panhandle is very different from South Florida. And so we know that every community’s vision is gonna be different and unique and we want to make sure that investors who are coming into Florida recognize those unique visions and plant their projects where it makes most sense for everyone to see success.

And so we’re really working with pushing communities in Florida to follow the model that Erie, Pennsylvania has set forth to say, “Here’s what we’re looking for. Here’s the kind of projects we need. If we have a crisis of affordable housing,” which we have in Florida and many places, “here’s how we wanna drive investment into affordable housing. If we’re a rural community and we’re looking for an increase in manufacturing to bring better jobs to our residents, here’s the land that we have available. Here’s how we’re gonna streamline the permitting process or the zoning process and bring in that manufacturing development that will help our community be successful.”

There are many strategies that communities can employ to make sure that the opportunity zone program works with them and for them, but they have to take the lead and that’s very difficult for communities when there’s no funding and there’s no capacity. And that’s some of the things that we’re working on, trying to help communities find the availability to put together a plan to market their vision. We can help find ways to make that happen.

Jimmy: I’m sure we have some community leaders listening to us right now. What can those community leaders do specifically to take advantage of the opportunity zone program and drive capital to the projects in his or her community? Or what can local communities do to otherwise incentivize investment in opportunity zones? What are some specific steps they can take?

Erin: Sure. Those are two questions. So, I’m gonna sort of take it in two parts. The first step communities need to do is to get educated. Understand the program. Try to designate a lead at the local level for leading the program whether that’s leading whatever changes the community wants to make, bringing investors into town to look at the projects that may be available. Designating a lead and make sure that it’s someone’s job to help drive this board for that community. Educating themselves and putting together a plan. Those are the most important steps for communities right now is to understand what their zones are, to use the data available to show what the vision for those pieces of property are in there census tracts. And so really, educating themselves, designating a lead, and putting together a plan are the most important steps that community can do today because the private sector is moving very quickly and the public sector will be left behind if they don’t try to catch up now.

On the other side, you asked about what can communities do to incentivize the investment, a very different question and going to be very important for different communities across Florida and across the rest of the country. There are states already that have passed legislation to incentivize on top of what the federal legislation provides. Florida doesn’t have income taxes on capital gains so that our state’s not able to do a similar incentive at the state level. But other states have. There are also states that have incentivized workforce. We know that if our companies in our opportunity zone are growing but there’s no workforce there to serve those companies, you’ll have a problem. And so there are states that are incentivizing workers to move into the opportunity zones and give them tax breaks as well. What local communities can do is take a look at their incentives that they may have. You have communities that don’t have anything of that sort, and if that’s the case, again, they can look at streamlining the permitting process, zoning property, they can look at city or county property that may be available to donate or put into a project.

For those larger cities that do have incentive programs available, they can certainly look at incentivizing with traditional incentives on top of the opportunity zone funding available at the federal level. So you can look at bringing in companies and providing local tax breaks. Putting in infrastructure is a very critical part for communities. I know here in Florida we’re working with a community that already had a plan to put in additional roadway infrastructure, water, and sewer in a certain area of town that is now designated as an opportunity zone. And they’re moving that up. Communities can sort of weigh these properties heavier than other properties that they’re looking at limited resources and limited capacity which we know all local governments have. So there are variety of ways that communities can make their opportunity zones more attractive. And we know that with more than 8,700 zones across the country, this is going to be a battle. Every community in Florida and across the country is fighting with every other community across the country to bring this investment home and to do that they need a vision and they need a plan.

Jimmy: Yeah. A lot of these communities are fighting with other communities. I think you’re right about that. And it’s interesting you mentioned that, while Florida doesn’t even have state income tax for capital gains, a lot of other states do and most of them are conforming to the federal program but there are about a dozen or so that are not. Most classic example I think…or like a few classic examples are California, at 13.3%, does not conform, neither do some other high-income tax states such as Pennsylvania and New Jersey. Sorry to get a little off topic there, but I just always like to bring that up to… If any of those state leaders are listening, we’d love for your states to conform with the federal program.

Erin: Right. In Florida, we believe in lower taxes and trying to make businesses as easy as possible for our business owners and our developers. It’s one of the reasons we really liked the legislation. We do believe more guidance is necessary to make sure that the legislation is successful, but having a limited statutory legislation makes better sense for our communities. But right, I mean, not only did those states, one, you’re disincentivizing by having higher taxes, but it’s also going to be more complicated. So when these individuals are trying to determine what tax rates they have on different funding sources or projects they have going on, they’re gonna have to separate and bifurcate the federal versus the state. It just makes the process more complicated.

Jimmy: Yeah, more costly and more complicated. Absolutely.

Erin: Absolutely.

Jimmy: So I wanna talk with you a little bit more about public-private partnerships when it comes to infrastructure. You mentioned infrastructure as an example about a minute ago. How would that work exactly, getting private funding for infrastructure under an opportunity zone structure? What would that deal look like and how would the investor be able to take advantage of any capital gains that may accrue from infrastructure investments?

Erin: So this is a big question right now. It’s come up all across the state and across the country on how can infrastructure be incentivized through opportunity zone? And it’s gonna be complicated. There are private infrastructure. There are obviously, in Florida, we have a lot of private highways that are used. They’re toll roads. They do have a mix of public and private financing. And that private financing potentially could come in through an opportunity fund and some of these deals in the future.

We’re working with a community that has industrial park and the industrial park was created completely with private financing including the roadways, the sewer, the water. There’s actually a light rail in there as well. So it really depends on the nature of the project. I think for your traditional infrastructure when you’re looking in downtown area or an area or a city that needs additional investment, you’re really gonna rely on the public sector to help push that infrastructure forward to incentivize the private sector to invest in the opportunity zone. So there’s gonna be a couple of different ways. Infrastructure typically is a public sector driven piece and I think that’s a great way for communities to step up and say, “We’re serious about this. We’re gonna invest in this infrastructure in this area to make sure that you investors know we’re serious about this and we wanna make it easier for you to come here.” But I do think that there’s going to be some opportunities for some private infrastructure investment. We’ll just have to see as the regulations continue to roll out exactly how those would be structured.

Jimmy: Yeah, that’ll be interesting to see what happens there on that front. What types of investments are community leaders typically looking for? I know we talked about infrastructure just now. If they themselves are not the ones to build out the infrastructure, looking for some private infrastructure investment, but what other types of investments are community leaders typically looking for? Can you give me some examples? And how would it differ depending on whether we’re talking about a rural community or an urban community?

Erin: That’s a great question. I think one of the…from the very beginning when opportunity zones were announced, one of the biggest industries we’ve heard from and talked to is affordable housing. There’s affordable housing issues all over the country and in many of these areas, because they are low-income, they have issues with affordable housing too. So I think the affordable housing industry is going to really boom in the opportunity zone areas because there’s a great need there and because it’s investment portfolio that people are familiar with. Developers and investors often use low-income housing tax credits and other programs to layer financing, and opportunity zone funding will just give them another boost in their return on investment to make it maybe even more attractive to invest in some of these areas. So that’s a big conversation that’s happening across the country. And I think that you’ll absolutely see affordable housing and mixed-income housing as well grow in these zones.

One thing that we haven’t talked about a lot on this call yet is the business development that can happen in an opportunity zone. I think that’s something that communities really would like to see is investment in businesses. The opportunity zone legislation provides that you can invest into a business partnership and help some of our small businesses across the country grow. I think you’ll see that play out a little bit more slowly. I think real estate seems to be the easier play right now and you’re seeing a lot more people moving forward in that realm. But as you see some successes in business investment, I think that that will also continue to grow. And that’s somewhere where local communities can really get behind, if they have a company that needs to grow, is positioned to grow but doesn’t have the resources and the only other option is to go on Shark Tank. Right? This is a great incentive for people to invest in some of our small businesses. So I think you’ll see that grow as successes come to play. People are still a little nervous about it right now just because there aren’t that many examples of it in the marketplace, but I think that will grow.

Jimmy: Yeah, I agree. I think it will grow. The first wave of opportunity zone investing seems to be focused on primarily real estate, but yeah. And I think that’s for a couple of reasons. One, the regulations on real estate are very clear right now or clear enough to get started at least. And two, real estate stays rooted in the community. A building is either in an opportunity zone or it’s not. It can’t grow outside like a business can. I know we’re still waiting on the IRS to finalize those regulations and hopefully answer some questions on the business investing front in terms of which businesses are gonna end up qualifying for eligibility under the opportunity zones program. But I agree with you. I think business investment will be the second wave that’ll become more popular to invest in hopefully toward the second half of this year and in the years to come as well.

I wanna ask you, where are you seeing investments going primarily right now? I mean, beyond just real estate versus business, are you seeing them go more toward urban metro centers, or are you seeing any rural investment? Where’s a lot of the money flowing right now? Who are you getting calls from?

Erin: I definitely think you’re seeing the actual money flow in the more urban metro areas and in particular projects that were already underway. Because the legislation is complicated and you have to set up a fund and figure out all of the mechanics of that fund and deploy money very quickly in most cases, what we’ve seen at the actual deployment of funds and to projects are projects that were underway, many in metro areas, and they’re sort of restructuring their financing to take advantage of the opportunity zone incentive in some way. It’s not as common right now to see these funds that are being set up, brand new funds who are trying to draw in investors and trying to draw in developers actually deploy cash at this point. I think, one, because the guidance has been delayed, but also you’re trying to develop a whole marketplace, right? You’re looking for investors and you’re looking for projects to invest in, and that’s just going to take some time. I think over the next six months you’ll really start to see that grow especially if the December 2019 date holds true. Now, that could change in the guidance but it looks like it would take a congressional act. So if that sticks, I think you’ll definitely see some investors rush to get capital deployed before the end of the year. But we’re really seeing those projects underway in opportunity zones take advantage of the incentive and I think you’ll see more brand new funds that are starting up bring investors in and deploy that capital later.

I think one thing that’s been interesting for us to see is the number of what you would consider, I guess, smaller local developers really starting to get in the game and say, “I live here in this community. I already have investors that I typically bring into my project and I do one or two or three deals a year. And instead, I’d like to set up an opportunity fund, use those same investors who may have capital gains, and do more projects so I can do four or five or six a year. I care about this community. I live here, my children go to school here, and I wanna continue to make this community better.” And I think you’re gonna see a lot of that. It seems to be moving very quickly where you’re looking at one project or one location deals and funds set up just for those particular projects and drawing in local investment. So that seems to be moving a lot more quickly than some of the larger $100, $500 million funds that you see in the news but they’re still trying to work out their mechanics, bring in investors, and find projects as well. So I think you’ll see some of the smaller…and when I say small, I mean $25, $15 million projects moving more quickly just by nature of the way the financing is set up and the guidelines that we have at this point.

Jimmy: So what’s been more difficult for you? Has it been identifying shovel-ready projects or finding capital? What are you finding more challenging right now?

Erin: I think finding the shovel-ready projects is definitely going to be a challenge right now and moving forward. I mean, shovel-ready, I would say, one, it has a bunch of different meanings. So you can have a piece of property that’s correctly zoned that’s ready to go, or you can have a piece of property that is correctly zoned with the infrastructure and layouts ready to go and zoning and permitting done. And that’s a lot more rare. So I think that finding shovel-ready projects is going to take more time especially, again, for these large funds that are being set up that aren’t for a specific area. I think you’ll see smaller funds that are set up that are local and they’ll know the local investors and the local developers and the local projects that are coming just by nature of their relationships, but for these large funds that are being set up across the country, finding that project pipeline is going to be difficult. And making sure they can do their due diligence, get the projects, and they’re going to have a good return on investment. I think there’s a lot still to be seen there.

Again, the projects that are already underway or had already been coming to fruition when the legislation was announced, have a little bit of an easier time because they already had the project ready to go, they knew what the return on investment was going to be, and the opportunity zone is just a little bit of whipped cream on top. But for those funds that are set up brand new with the intent of the legislation, let’s find projects in these low-income areas and move in and make a difference. Finding that return and doing the due diligence on the projects is going to take a lot of work.

Jimmy: But that’s part of where you come in, right? You serve or you have the capacity to serve, at least, as a liaison of sorts between larger national funds and these local communities. Is that right?

Erin: Yeah. So we’re working with some funds at the national level and some fund managers at the national level to say, “Here’s projects that we know about. Let’s find funds that meet their vision.” And again, it goes back to our main goal is to look at a community or developer or project and an investor and make the visions meet together.

Jimmy: So you spoke earlier about your efforts to do a lot of education and holding the workshops and encouraging local community leaders that the first step is really to educate themselves in the community about this program. In that vein, are you doing anything to educate your clients about social impact?

Erin: That’s the question that’s come up quite a few times, especially in South Florida. I would say, for us, that’s where we see the biggest need. We’re looking at working with Miami-Dade County in particular. I spoke to their policy council in December and one of their very first questions was, “How do we prevent displacement and gentrification?” And it’s a big question especially in your Metro and urban areas. It’s not as much of a struggle for your rural communities and even your mid-sized communities. I think they should be aware of it and cognizant of it, but it’s not as big of a problem. There are areas in Florida and across the country, Metro, urban areas that have already seen a great deal of gentrification and displacement and they are really looking to preventing that. And so it’s certainly a topic of conversation. We’ve talked to some folks who are working on data solutions, private sector based statistical and data models to help that problem in real time. And that’s an exciting development. I think if we can work with communities and show them where this displacement and gentrification is happening more quickly, otherwise, you’re waiting on census data, which…census data is fantastic but it’s always after the fact. And so some of these communities I think you’re gonna see growth limited until they are sure that you’re not gonna have displacement or they’re gonna wanna, again, partner with those developers and investors and make sure that it’s the right vision for the community.

Jimmy: Governor Rick Scott you mentioned was very focused on job creation and that had a big impact on which opportunity zones you guys selected when it came time to nominate to Treasury. You’re kind of speaking to that concern of gentrification and the fact that there’s no community impact requirement in the legislation and there’s no reporting requirement in the legislation, but from the IRS hearing from a couple weeks back, several of the speakers actually did suggest that some sort of reporting or data transparency be included, at least at the transaction level, for a lot of these opportunity zone investments. What are your thoughts on that and what type of reporting, if any, would you like to see become required or at least strongly suggested?

Erin: Sure. Well, I think, again, one of the benefits of the legislation was that it limited some of the bureaucracy to make this an easier program for investors and developers, but the problem with that, in this case, is that you won’t know how successful it is. And I think for all of us working in the opportunity zone field, at this point we want to know where the successes are in the long run, and so you wanna know what states were able to deploy this more successfully. What communities in each state was able to bring an investment and did it make a difference on the ground? There’s quite a few private sector solutions to that. I think that there are fund managers that are working on tracking some of the data better. But I agree, I think many of us in the field agree that if the regulations provided some way of data reporting… We don’t want it to be too onerous or too difficult for people, too costly. But some degree of tracking would make sure that we know how successful this program is. And if it is successful, then there may be a way to re-up it 10 years down the road to see…if it really made a difference in these low-income communities, it would be a program that could continue on. I think that’s to the benefit of everyone.

Jimmy: It’s kind of a fine line to walk, right? One of the main attractions of this program is that it’s so easy to set up an opportunity zone fund. You self-certify. There’s no reporting. There’s very little bureaucracy involved at all. I think it’s just a one-page tax form you have to submit to the IRS, but compare that to the New Market Tax Credit program for all the good that it’s done, there’s a lot of bureaucratic hoops to jump through. So I think a little bit more reporting might be nice but obviously, we don’t wanna go overboard and kind of ruin a lot of what’s attracted people to this program, the openness and flexibility of it all.

Let’s shift to disaster recovery now. I know that’s one of your specialties and you did a lot of work on that at your time working for the state of Florida. The opportunity zones overlap a lot of areas hardest hit by the hurricanes from the past couple of years, Irma in 2017, and Michael last year in 2018. How is the opportunity zone program helping these areas in terms of disaster recovery?

Erin: The first thing we saw after Hurricane Michael was that communities really began to pay attention to opportunity zones and the potential there. I think over the last year we had felt like we were trying to educate communities across the state, but it was very difficult to get them to listen or understand the impact or the potential impact and really engage. And as soon as Hurricane Michael hit and you had very real devastation across many counties in the panhandle, they began to look at an economic recovery and what that would look like, and opportunity zones came up within days. And that was very encouraging. And so I do think there’s going to be ways to overlay the disaster recovery funding that comes in at the federal level along with the private sector funding on the opportunity side and make a strong real difference in these communities especially in the economically distressed areas that were just devastated by Hurricane Michael. Many of the communities are really paying attention to that right now and trying to figure out, how does the community support it? What is the community’s vision? They’re moving in the right path that we’re looking for other communities to do. So I think that’s very encouraging. And I think that you’ll also see investors and investment come in that would typically maybe come in after disaster, but even more so because they now have a new incentive they can overlay.

I do think, in particular, in some of our disaster areas, they wanted to expand the number of opportunity zones. Can we add some? Can we move them? And obviously, that’s a conversation that’s been had across the country. At this point, that doesn’t look possible, but I know that that’s something that they are interested in looking at because there was just such widespread devastation and some of those communities have only a handful of opportunity zones for the area. So that’s something they were certainly paying attention to and looking at and they actually included in part of their long-term disaster recovery plan, and I think that you’ll see that come into play not only with private sector financing but at the federal level. I think with disaster recovery funding, especially on the economic development side, they offer, again, some additional incentives.

The Department of Commerce at ADA sometimes they’ve offered programs where the local matches less if it’s an opportunity zone. They first offered that last year for disaster recovery funding after Irma. And with the task force that President Trump has created to look at each of the federal agencies and determine how to provide more funding into opportunity zones, I think you’ll see federal government shift so that disaster recovery or any other kind of federal funding that comes down, you may get more benefits if you’re in an opportunity zone. So that will just layer the benefits of the opportunity zone private side with the public funding that can come in after disaster, and I think that will be key to helping this area recover.

I’ve worked in disasters across the state of Florida for more than 10 years and Hurricane Irma was very large and covered a long swath of the state, but the devastation of Hurricane Michael is unlike anything we’ve seen since Andrew. And those communities are going to need serious help and funding to get back on their feet and revive their economic development, and I think the opportunity zone program will be critical to do that.

Jimmy: Yeah, I hope you’re right there. It’s interesting, actually, that the island of Puerto Rico was designated as an opportunity zone almost in its entirety. They received a special exemption to designate all of their low-income census tracts which was essentially the entire island is an opportunity zone. Do you wish that Florida could have gotten some treatment like that too, I’m sure?

Erin: I know that there have been folks in the panhandle who would agree with that. I do think as an overall policy, the goal here is to take a certain percentage of tracts and see if designated investment will make a difference, and if you share that across the whole country, it’s almost impossible to track and see if a difference was made. So I think the intent of the legislation to keep it narrowly focused on a small percentage of high-need census tracts will really show us better if it made a difference or not, but there are certainly areas across Florida, and California with the wildfires, North Carolina with hurricanes, I’m sure those states also would agree that they would like to expand it. And you don’t know. I mean, with the disaster recovery funding coming down there’s potential that Congress could change that. We don’t necessarily see that very likely but it’s certainly a potential.

Jimmy: Yeah, it’s always possible, I suppose, but it would take an act of Congress at this point to add more opportunity zones.

Erin: Correct.

Jimmy: Well, Erin, we’re getting toward the end of our time today, but before you go, I wanted to ask you, what’s been one of the most memorable projects that you’ve ever worked on over the course of your career? Can you tell me a little bit about it?

Erin: Sure. It was hard…I was thinking about this question for a while, and because of all the disaster recovery work, it’s been very hard. I would say, on the disaster recovery side, being on the ground in these communities immediately after a disaster is like nothing else. It really drives your passion in the public sector. This is why I do what I do. Right? It really reinforces that because you really are physically helping people in need.

But as far as one specific project, I think the project that has impressed me the most on the economic development side is a program called LIFT Orlando. It’s a community-driven approach to economic development out of Orlando and it’s a project of a group called Purpose Built Communities that’s based in Atlanta, Georgia. And so they take this model, they call it “Cradle to Career” and they basically take a zip code that’s highly, highly distressed. And they take a look at everything that makes the people in that zip code well. What does their well-being look like? Whether it’s healthcare, education, workforce opportunities, housing…and they really go from the ground up. And so LIFT Orlando has been a great example we’ve used many times and brought people to see them. Touring around and seeing it, I mean, it just gives you chill bumps when you see the people that are invested in this community and the difference they have made.

They put in a free doctor because it turned out it was cheaper for the hospital to put a doctor in the neighborhood than it was for the people to go to the emergency room all the time. And they have partnered with a national group to bring in a world-class child-care facility so that the children are learning from day one and ready for elementary school and the parents also have a way to go to work and continue to make their families self-sufficient, all the way up into workforce training. And they’ve built mixed-income housing which not only provides for the current residents, but it brings people into the neighborhood that wouldn’t have come into the neighborhood before.

And so they’re literally changing the lives of this very small zip code community in Orlando and we’re trying to replicate that across Florida and a couple of different cities including here in Tallahassee where the capital is because it makes a true difference and it’s community-driven at its foundation, and that’s really what my passion is, what our company is all about. And my career has been about Florida’s communities and what we can do to make them better. So it’s a fantastic project. And they are an opportunity zone. They are one of the people that contacted us first to pitch their project as an opportunity zone. Of course, it fit the economic analysis and we were so impressed with their project that we went to visit. We met the people on the ground and the leaders that are leading this effort and it’s an incredible project. They’re looking at starting up their own opportunity fund to bring more investment in and they’re gonna make a real difference in the life of that community.

Jimmy: Well, that sounds really neat. Thank you for sharing that. Where can our listeners go to learn more about you and Madison Street Strategies and the work you’re doing there?

Erin: Sure. Our website is www.madison-street.com.

Jimmy: Excellent. And so for my listeners out there, I’ll have a show notes page on the Opportunity Zones Database website at www.opportunitydb.com/podcast. And you’ll find links to all of the resources that Erin and I discussed on today’s show. I’ll have links to Madison Street Strategies and LIFT Orlando and Erin’s contact information as well in case you’d like to get in touch with her. Well, Erin, thank you for joining me today. I really appreciate your time. It was great talking with you, and I hope to talk with you again soon.

Erin: Thank you very much.

Jimmy Atkinson

Jimmy Atkinson

Hi, I'm Jimmy Atkinson... I founded OpportunityDb in August 2018. I'm a veteran Internet entrepreneur with a background in economics and Web marketing. I previously founded ETFdb.com. These days, I am passionate about impact investing and tax-advantaged investment opportunities. At the crossroads of these two ideals is the opportunity zones program, a place-based tax policy intended to economically transform some of the poorest areas of the United States with new real estate and business development.

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