Opportunity Zone Strategies for Community Development, with Jeanne Bonds

Jeanne Bonds

How can investors, financial institutions, and other local stakeholders leverage the Opportunity Zone incentive to improve community development results?

Jeanne Bonds is a professor of the Practice of Impact Investment and Sustainable Finance at UNC’s Kenan-Flagler Business School in Chapel Hill. She was formerly director of community economic development for the Federal Reserve Bank of Richmond.

Click the play button below to listen to my conversation with Jeanne.

Episode Highlights

  • The mission of the Invest to Sustain Initiative at the University of North Carolina’s Kenan-Flagler Business School in Chapel Hill.
  • The good and the bad of Opportunity Zones, and how the original legislative bill changed before it was passed as part of the Tax Cuts and Jobs Act of 2017.
  • How Opportunity Zone fund managers and investors can better work with communities in order to achieve social impact.
  • Examples of good Opportunity Zone projects, including affordable housing, Habitat for Humanity, private-public partnerships, workforce housing, and corridors with anchor institutions and universities.
  • Other tools — including tax credits and the Community Reinvestment Act (CRA) — that can be used alongside the Opportunity Zones incentive.
  • How the CRA has evolved over time to allow for more expansive community development activities.
  • How efforts to modernize CRA regulations will include incentives for community development in Opportunity Zones.
  • Why Opportunity Zone funds should consider utilizing community banks and CRA credits.

Featured on This Episode

Industry Spotlight: Invest to Sustain Initiative

UNC Kenan-Flagler Business School

The Invest to Sustain Initiative at UNC Chapel Hill’s Kenan-Flagler Business School has three goals: 1) is to create an impact investment concentration track for business students; 2) to produce community development programming to teach local stakeholders and anchor institutions about impact investment; and 3) to create a database of good community development projects and best practices and models for transactions to achieve community development results.

Learn more about the Invest to Sustain Initiative:

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: Welcome to the Opportunity Zones Podcast. I’m your host, Jimmy Atkinson. How can investors and financial institutions leverage community development through Opportunity Zones? Joining me on the show today to discuss, this is Jeanne Bonds. Jeanne is director of the Invest to Sustain Initiative at the University of North Carolina Kenan-Flagler Business School. And she joins us today from her office in Chapel Hill, North Carolina. Jeanne, welcome to the podcast.

Jeanne: Thank you. I’m happy to be here.

Jimmy: Great. Happy to have you on the show today with me, Jeanne. Thanks for joining us. And to get us started, could you tell us what is the Invest to Sustain Initiative?

Jeanne: Yes. So the Invest to Sustain Initiative is part of the Kenan-Flagler Business School. And it really has a couple of goals. One goal is to create an impact investment concentration track for students, both undergraduate as well as MBA students because we know that that’s a great entrance to individuals that are pursuing business degrees that we want to better incorporate that into the curriculum.

The second goal is to do a lot of community development programming. And by that, I mean really work with them stakeholders across North Carolina, Virginia and South Carolina to make sure that community colleges, local governments, local universities, nonprofits, community development corporations really are in the neck and on the learning curve as to how investment is working, how they should leverage different types of capital for different types of projects and programs. So a huge element of this is actually being out in the community working with those individuals to help them learn impact investment.

And the third piece is creating a place where people can find examples and models of good, solid community economic development. So we’ll be creating a database where you’ll be able to go and look at promising or best practices and actually seeing models of the financial transactions that communities undertook to achieve community development results. It’s really one thing that’s lacking. Later, if we talk about the Community Reinvestment Act, there is a website where you can go to get some aggregate data about community reinvestment that the banks are engaging in, but you can’t actually see the projects. So one of the pieces we felt strongly about was having a place where you could go and actually, a community or a developer, investor could actually see some really solid examples of work in practice. So all together, those three pieces of it encompass this Invest to Sustain Initiative.

Jimmy: That’s great, Jeanne. Thanks for clarifying that a little bit. Thanks for that information. Before we proceed and start talking more about Opportunity Zones, I wanna get a little bit of background on you, Jeanne. You come in with a lot of credentials. You are a professor now at the University of North Carolina, but you were formerly director of community economic development at the Federal Reserve Bank of Richmond. Can you tell me a little bit more about your experience and what led you to where you are today?

Jeanne: Yes. So I have a long tenure of experience in community development, really going back to shortly after the Community Reinvestment Act was passed by Congress and the first regulations were coming out. So at the Federal Reserve, that’s one of the three banking regulators, the community development function at the Federal Reserve, it exists in all 12 Reserve Banks as well as the Board of Governors and really, the emphasis for that is the Community Reinvestment Act.

So, after it was passed in 1977 and started to roll out, the Federal Reserve Bank realized they needed someone there who can talk to the banks and the communities to kind of be an intermediary in those conversations to help move it along and answer questions. And then as the field of community development grew, which I would say is mostly because of the Community Reinvestment Act, we now have this whole field called community economic development.

As that grew, the Reserve Bank became more involved in that. It’s a different function from what you would think of the Reserve Bank because they do monetary policy and then they do supervision and regulation of the banks. And community development is very much a field of expertise that’s a practice field, but it’s grown up in the Federal Reserve and it results in applied research, convening a lot of interaction with the banks to help them match up with community organizations so that they can fulfill their responsibility under CRA. So, a great experience, they provide a great service.

I left there because the one thing I couldn’t do at the Federal Reserve is actually do that matchmaking. I could put groups together but I couldn’t actually help them think through the financial models. And so that’s really the whole reason for going to UNC and creating the Invest to Sustain Initiative because now I can put them in the room together and then I can actually help them craft what the leveraging of the capital stack might look like. So, that’s really the reason for doing it and to be able to spend more time on the promising models as opposed to, you know, just doing the convenings as I did at the Federal Reserve.

Jimmy: A lot more matchmaking actually putting capital together between investors and developers, I think that’s great. Let’s dive in now. Let’s talk about Opportunity Zones. In particular, I wanna get your opinions on what’s good about Opportunity Zones and also what’s bad about Opportunity Zones? There were some changes between the original provision and the final statute that ended up being passed at the end of 2017. What changed exactly, though, Jeanne? And what are some of the ramifications of those changes?

Jeanne: So I think a couple of things. So their original concept of Opportunity Zones, it resulted in some standalone legislation in the Congress and it was bipartisan legislation. But if you were to roll back and look at those initial House bills that introduced this concept as early as 2015, one of the major components was that there was a formula for governors to designate their zone.

As this rolled along and ended up becoming a provision in the Tax Cut and Job Act, it was greatly reduced down into this provision. So the tax incentive piece of it stayed the same but I think a major loss was that formula that the governors would use to actually designate their zone. So what I mean by that is governors struggled to figure out their political creatures and they struggled to figure out, “How am I gonna designate these zones, you know, without any guidance?”

So certainly, they all understood this is low-income census tracts, they looked at how many they had, they can only designate 25% of them. That forced them to make political choices. So you may have had a state that said, “We’re going to put one in each county, at least one in each county.” So rather than it being a very pragmatic evidence, data-driven decision as to how to achieve the best result, you ended up with a political decision.

And that caused ramifications down the line in terms of, you look at a particular city and maybe they had 25 eligible tracts and 9 were designated. It may be a hodgepodge and you may have really solid projects that could have benefited from this but they’re across the street from the zone. So I think that was a myth in how it was refined. Not quite sure how that piece of it fell out but there are lots of tools, there’s dynamism tools, there’s investment tools.

There were a lot of ways you could have applied a formula so that you were really choosing a group of census tracts where you could really test this theory and find out if it really works. So at the end of this, it’s gonna be difficult to really evaluate it and figure out what worked and what didn’t because so much of it became a political process. I think some of the other misses were guard rails. And what I mean by that, and we can talk in more detail about it, is that other programs implemented at the federal level, like New Markets Tax Credit, had very similar goals.

But New Markets Tax Credit is a very streamlined process, it’s in the Department of Treasury, it requires communities and those developers to set up advisory groups. There are lots of really streamlined processes in that program that certainly could have been added to this program. As it turns out, this program has no owner and it has no home. So there’s regulations, but there’s no place in the federal government, no any one place for this. So all of the federal agencies and departments, through a council, they might give added bonus points for existing grant programs but there’s really no one who owns it at the federal level. There’s definitely no one who owns it at the state level.

So governors had a responsibility to designate the zones and then after that, if they designate a czar or a person in charge, that was totally up to them. You don’t really have an owner at the state level and the activity’s all occurring at the local level. So it’s a mechanism without a home and without anyone to really own it. And I think that weakened the program because ultimately you have no place to go to get final say on anything.

Jimmy: Right. I kinda think it’s a double-edged sword. To a certain extent, there are some benefits to there being no centralized authority that you have to go through. It opens up or it’s less restrictive on capital or getting started, but, yeah, your point is well taken that, you know, to say that there is no one place to go to for help and for guidance and for guard rails, as you say. Jeanne, you mentioned a few things that were bad about Opportunity Zones, what’s good about it, though?

Jeanne: Well, I think, I mean you’re right, it’s a double-edged sword because without a lot of that bureaucratic mechanism, you know, communities, developers, fund investors can be a lot more creative because they don’t have those constraints and I think we’re definitely seeing some of the creativity. There was an issue early on with transparency because this is information not housed with any owner, so the information was primarily going to the IRS.

You know, we’ve seen a change with the regulations where the IRS is gonna collect some information and conceivably, you know, make that public in some way. But, you know, again, from my standpoint, when you implement public policy, you want to be able to evaluate public policy and figure out what worked and what didn’t. I think it’s still constrained to some extent because not everything is out there and available in any one place for researchers and others to really take a look at.

But the innovation’s certainly there. I think the interest level because you don’t have all these bureaucratic constraints on it is extraordinarily high, especially, you know, from the investor community, a lot of interest in how to do it. The flip side of that is it makes communities very nervous because these are low-income communities that are used to things happening to them instead of with them. So it added a degree of uncertainty and skepticism with the communities. So we have something in play that has great potential, but on one hand, you’ve got a lot of excitement and eagerness and on the other hand, you’ve got a lot of apprehension and fear.

And unless programs like mine with Invest to Sustain come and pull those two entities together and bridge that gap to move towards that innovation, I think it can be very difficult to achieve that.

Jimmy: Let’s do that a little bit more now. Jeanne, from an investor or a developer standpoint, as we mentioned, there’s no central bureaucratic mechanism that you have to work through, it’s much more of an open market system. But how can those individuals choose to work better with communities in order to achieve social impact as per congressional intent?

Jeanne: So I’d say first of all, you know, when you create an opportunity fund, you can voluntarily list that fund at novaco.com, so Novogradac’s website, they have a listing that, you know, those funds can voluntarily list there. And the State Association of Housing Finance Agencies have one on their website as well.

So a good practice is when you create a fund, you voluntarily list it and you say, “Here’s about the size we plan to be, this is our geographic focus, this is the type of project we’re looking for.” Because then the names of the funds are out there and communities can call them and it’s open. So I think that’s a good first step that they could do is to not be secretive and put it out there.

Because a lot of times in a local community, if you’re buying a piece of land and it’s just listed as an LLC, really, the community can’t tell if that’s an opportunity fund or not. So I think going to transparency, you know, listing the information out there would be a great idea.

I do think in the New Market, one of the strengths of the New Market Tax Credit program is the required community advisory council. It’s definitely not required with Opportunity Zone. But I’m a former mayor and so that’s in my background as well. So when I think about how any type of development or project comes together really well at the local level, it comes together when a developer, investors, builders, you know, are open and upfront with the community and say, “Hey, here’s a vacant building or here’s a piece of land, this is what we’re thinking about, how does that sound to you?”

It just makes for a good practice between neighborhoods and neighbors and, you know, retail and industrial and how it fits with the community. So I think having that, maybe you don’t have to go to the extent of having this very formalized advisory council but presenting in that town or study, getting feedback, making sure that your project fits then with a strategic plan that they have locally or other plans that we have just makes for good neighbors. And it’s gonna make your planning and permitting process run more smoothly, it’s gonna make the community feel like you’re doing something that’s gonna benefit them. So, I mean those are a couple of solid ways to go into a community and just build relationships and probably come up with a much better outcome.

Jimmy: Well, I agree with that 100%. Get the community involved early and often in whatever project you’re undertaking. So, Jeanne, you’ve seen a lot of different Opportunity Zone projects, I know you’ve been to a lot of different Opportunity Zone events particularly in the North Carolina area. Can you give some examples of some really good Opportunity Zone projects that you’ve seen and what makes them good Opportunity Zone projects?

Jeanne: Yeah. And I mean, one thing I’ll say upfront is I hope that at some point in this year and certainly into next year that we start to see a lot more projects that focus on Opportunity Zone business. Because when the regs were first being formulated, you know, the first jump was real estate, easier, straightforward, you know, seemed to make sense.

Now that we have the full slate of regulations, I hope that there’s a lot more thought and I’m starting to see a lot more activity around Opportunity Zone business. Because I think driving to moving viable businesses into low-income areas that actually create jobs and create some mechanism for prosperity for people in those communities is where you would actually see the full positive impact of this program.

So there are a lot of projects out there, some of the…at the Federal Reserve, I traveled in a five-state-plus-DC district, so it was Maryland, West Virginia, Virginia, North and South Carolina and DC. And I have to say I’m still in that area, though I look at a lot of information from other states. So I’ve seen very interesting affordable housing projects and I think affordable housing projects are probably one of the more difficult real estate projects to undertake with or without Opportunity Zones.

But I’ve seen some interesting ones where the partnerships are with Habitat for Humanity or where you’ve got P3, public, private, philanthropic partnerships rolled into the Opportunity Zones. So I think there’s gonna be some real creativity around… And I don’t think these will be large-scale affordable housing but I think there’s gonna be some interesting examples. I know there’s some that are very focused on workforce housing, teacher housing, so having a specific market focus.

So I think we’re gonna see some innovations in affordable housing and that’s clearly something the country as a whole has to address. Quite a few projects that are in corridors with anchor institution universities. So I’m gonna use Rock Hill, South Carolina as an example. I think there are nine opportunity fund projects in Rock Hill. And there is a corridor between Winthrop and their Main Street and they’re doing redevelopment of some old mill.

And South Carolina has done, I have to brag on them because they’ve done a great job renovating and redeveloping old mills. They have a series of state tax credits that have made it very viable to go in and restore some of these buildings and bring some vibrancy to some local downtowns and help some smaller towns grow.

So in Rock Hill, you’ve got redevelopment of a mill, you’ve got an interesting parking deck project, and I know parking decks are controversial. There’s a whole slate of bills in Congress to not only eliminate Opportunity Zones but eliminate certain types of projects including parking decks. But there are times when a parking deck is something a city needs for a redevelopment of an area but may not be able to pull off the funding so there’s a couple of examples of that where the fund is actually building the deck. They have some revenue stream coming in, the city is gonna make payments once a year and at the end of the 10-year period, buy that deck back out. So I think there can be some good examples of those projects.

There’s a couple with hospitals, where hospitals are gonna be able to expand specialized units by letting an opportunity fund come in, build that for them, even staff it and put the equipment in and then have the hospitals, again, buy that back over the 10-year period. I think those are great examples. You know, some of the negative ones you hear about are, you know, hotel projects, you know, which just may or may fit into the, and certainly, there’s some that do. But just in random places where clearly you can see that’s a tax incentive taking place but not necessarily something that’s gonna drive any type of job creation in the community.

And then there’s some that are I think somewhat controversial because they might be a sports arena or some type of sporting recreation facility. And that takes you back to what kind of jobs would that create? It might create minimum wage jobs, a retail type job. So I would say that in some of those examples, there are other steps that can be taken.

Work with the community, create some entrepreneurship, help the community create the businesses that support that sports arena instead of just building the arena, letting folks coming in, actually help the community build their own businesses and staff that up, and then you can create a wealth pathway for individuals in that community.

Starting to see some conversations around that. Again, I think with business accelerators, there’s one actually planned in Chapel Hill. You can take technology transfer out of the university, create small businesses, move them into an accelerator and then move them from that accelerator out into the communities that need the jobs. So I think there’s a couple of projects verging on that that could be really interesting.

Jimmy: So a lot of different ideas there of what you think represent good Opportunity Zone projects, affordable housing can be tough but workforce housing certainly up there, and you also spoke about some business investment opportunities. And, Jeanne, you didn’t mention any specific names or do you care to mention names of any of the projects or funds?

Jeanne: Well, I think, I mean, so Rock Hill, there’s literally non-funds doing projects. I mean, one is, the Sherbert Group out of Charlotte has a couple of projects in Rock Hill and so those are some good solid ones to look at. The one I talked about with housing and Habitat for Humanity is in Charlottesville. And I think all of these are documented on the Economic Innovation Group website that they created a few document projects that people can go there and take a look. A couple other funds, the accelerator project in Chapel Hill is, Grubb Properties is working on that building in Chapel Hill. But again, there’s a whole list of really solid projects you can take a look at on that website.

Jimmy: Good. And I’ll be sure to link to that EIG resource on the show notes for today’s episode, which you can find at opportunitydb.com/podcast. So thanks for providing some of those names, Jeanne, that’s helpful. So the Opportunity Zone incentive, I think everybody knows it’s just a tool, really, it’s not the be-all-end-all but it’s a tool for raising capital. And most of our listeners or all of our listeners are aware of that but they may not be aware of some other tools that might be out there.

I know, Jeanne, that you believe that the Community Reinvestment Act and the proposed new regulations around that act can be a prime example of another tool in the tool belt for developing in these low-income communities and driving some real needed social impact. Can you speak about that a little bit and about other tools that may be available as well?

Jeanne: I think most developers and investors and funds are aware of different tax credits available at the state and federal level. So low-income housing tax credits, new market, historic tax credits. I mentioned South Carolina as a state that has a lot of other tax credits, they have a community development tax credit, an abandoned building tax credit. So I think looking at that landscape of other tax tools at the federal and state level, there are some ways that some, some link up better than others but I think in terms of innovation, there’s a lot you can do there.

You know, all of these projects, well, most of these projects require some debt as well as equity. And so because they are low-income census tracts, they’re the same census tracts you would find in New Markets Tax Credit. They’re the same census tracts that would be a focus in the Community Reinvestment Act.

What I found is that most investors and developers, and even, unfortunately, you still have many communities, they’re just not familiar with the Community Reinvestment Act. So, let me just say a few words about that because I think it’s worth exploring. It was passed in 1977, there are a whole series of pieces of legislation that passed during that time period really focusing on discriminatory practices in various sectors.

So what led to the CRA is redlining where, you know, financial institutions were, real estate were drawing red lines and saying, “We’re not gonna go into this area because of A, B and C.” So these are the same communities we see today that had been disinvested.

So CRA came about and basically its two main keys were, at the time, small business and affordable housing were kind of the mainstay of it. CRA is relational. So it all starts with a relationship with a financial institution. I can easily defend financial institutions because I believe even if we didn’t have CRA, financial institutions would still be engaged in these activities.

Now we can argue about what extent, but it’s good PR for banks. Banks acquire a deposit through this process and banks genuinely want to be part of the community and community development. But just like with the Fed, I said this field of CD grew up, it’s also grown up in the bank. So as the bank had to meet their obligations of the regulations, you have people in banks that are really focused on community development.

Over the years with the regulations, there have been more examples and some add-ons to consider with CRA. So for example, not too long ago through the regulatory process, workforce development was added as a qualifying activity for CRA. Broadband as an essential infrastructure, broadband as a tool a bank can use for digital and technology expansion has been added as a qualifying activity.

So I think it can be really interesting when you look at how those types of activities could pair up, it’s what’s happening in an Opportunity Zone. You could then start to add in workforce development and training programs. You could put the broadband in those facilities and banks can be brought in through…

Banks have three tests under CRA, they have the service test, the lending test, and the investment test. It varies based on the size of the institution. But here you’ve got three other ways that you can bring the banks in and these are the areas that they’re looking for qualified CRA activity.

So I think that can be an interesting tool that really can pair up nicely. You’ve got two banks that have opportunity funds. The Woodforest Bank has a real estate fund and PNC has a social impact fund that has an advisory committee. So you’ve got two banks out there with a fund and they are pairing up their funds’ activities with CRA. So I think there’s a lot of untapped potential for that.

Now we are in the middle of, there hasn’t been a lot done to modernize CRA. So CRA, I mentioned, passed in the late ’70s, the regulations are updated not frequently, but the act itself hasn’t really been modernized to take into account all the changes we’ve seen in banking. So, you know, banking was confined to state banking, now we have national banks, that was not part of it when it was originally passed.

But we do have now a modernization rulemaking taking place with two of the three regulators. The Office of the Comptroller of the Currency in Treasury and the FDIC have put out proposed rules to modernize CRA and it’ll take some amount of time after comments are received to work through that regulatory rulemaking. But we could see some changes that potentially could even be more enhancing to Opportunity Zones. We could certainly see, you know, depending on how they turn out, some challenges with that.

But I would just encourage communities, developers, investors to think about that debt side and then think about how they would have that relationship with the financial institution around the CRA component because that can conceivably be a win-win situation.

Jimmy: Now, that’s great. A lot of activity with the Community Reinvestment Act. I don’t want to harp on the proposed CRA regs for too much longer, but I do think it’s important for our listeners to know just that, you know, exactly what’s going on.

And I think you stated it well that, you know, proposed regs were recently issued, I think, back in December of 2019 by the FDIC and the OCC, as you mentioned. And if approved, one of the changes to the CRA regulations is that CRA credits would be given for any community development that provides financing for or supports qualified opportunity funds, is that correct? And the FDIC and the OCC are only two of the three regulating bodies. There’s the third one is the Fed, I believe, and they have not signed on to these proposed regs. Maybe talk a little bit about that as well?

Jeanne: So I’ll start with that, your last question. So that’s really a component of which banking regulator regulates which type of bank. So the OCC and the FDIC together are about 85% of the banks. And the Fed has about 15%. So the bulk of the banks are regulated by the OCC and the FDIC and those tend to be the larger institutions. So that’s one of the reasons why you see them falling forward.

When you think about how the regulatory process works in different-sized banks, and one of the pieces of the proposed rulemaking is around some metrics and formulas, it’s easy to see why that might work better for larger banks and the Fed is being a little bit more hesitant to sign on about that particular metric.

I did listening sessions when I was at the Fed and the smaller banks tended to like how CRA is now without changes to it. So, you know, that may change in the future as the process goes along. And I think everybody’s hopeful that all three regulators would be on board because it’s been that way in the past and it can certainly get confusing to have different sets of rules for different-sized banks under different regulators.

So I think, you know, the other piece about the CRA modernization, besides the metrics, there is a lot of concern about lots of branch banking in underserved areas both rural and urban. And a lot of what CRA is built around are these assessment areas where the banks do business. And we have this move towards digital and online banking, yet these are the same communities that don’t have the broadband adoption and adaption. So I think a lot of how you could make this complementary exists with the CRA and that’s why pairing it up with the opportunity funds could be, you know, a win-win for the fund as well as the bank.

Jimmy: Great. Well, yeah, certainly, a lot changing in the banking industry over the last couple of decades. It’s good that they’re modernizing these regulations and bringing Opportunity Zones into the mix as well and providing credits for those institutions that support qualified opportunity funds. I think that’s great and I’m hoping that those regulations get enacted relatively soon and can help drive some more capital into these Opportunity Zones. Do you have any idea when these proposed regulations would go into effect?

Jeanne: So typically, if you look back historically, there have been periods where there have been some, you know, I hate to say “minor,” but they really were more minor changes where examples were provided through a process called “question and answer” and we called them the Q&A. There were some more extensive changes back in 2006.

But this really looks, you know, 250 pages of proposed regulations that this could be quite lengthy in terms of reading all the comments, recrafting and putting it back out. I would be surprised if it occurred in a year. Just to be honest, because you got two different entities, you know, receiving feedback, crafting information, and then you still have a question of whether the Fed is going to tie in with them. I know they would like to do it faster, but I really would be surprised if it was faster than a year.

I think the other piece of this is, I used to always tell communities that even when the Q&As came out and did a little bit of refining, like around workforce and broadband, for example, you kind of have this system in place where you want to educate the regulators so you’ve got a supervision staff that are used to doing things, you know, a certain way and there’s very specific processes in those entities.

So you’ve got to bring a whole regulatory staff up to date with what the changes are. You’ve got to work with the bank and bring them up to date, and then you’ve got to work with the community and bring them up. So it’s three legs of the stool. And if we added opportunity funds, investors and developers, we potentially have four groups.

And so it does take some effort to make sure that everybody is being educated and kind of in sync. So if you go out and start talking about the new rules and regs with the community, but the banks aren’t comfortable with it and the regulators are comfortable with it, then you’ve got kind of a mess.

And I know from the Q&As in 2016, it’s literally taken up to now, 2020, to see a lot more activity from banks around broadband and workforce, and it’s still not extensive. So that shows you how long it takes for that learning curve to go out there. You know, one misconception about CRA is that somehow regulators are telling banks what to do and that is not at all how it works.

A bank has a strategy, they might be a small lending bank, they might be a housing bank that does mortgages. They have a mission, they have a strategy, no regulator is telling them they have to do, we’re basically giving them a menu. They don’t have to do anything, they can still do it with, framed within what they do as a bank.

And CRA is largely storytelling. The bank tells its story of who they are and what they do, they tell their story of the communities they are serving, what they need and how they’re gonna meet that. And then the regulators come back and double-check that. And banks are subject to a lot of other regulations. So the CRA does not tell them to do something that’s not safe and sound because they have to meet their other regulatory guidance for that.

So, through this telling the story, there’s definitely checks and balances to make sure that the needs are being met but I just wouldn’t want anyone to count on, you know, massive changes occurring quickly. It tends to be a slower-moving process but banks overall do a great job with CRA. Many do well beyond what is required of CRA. And as I mentioned, I think they would do it regardless of whether it was a regulatory requirement at all.

So I would encourage investors, developers, opportunity funds to think about CRA. You can go to richmondfed.org, Community Development, and there’s a CRA resource center. I helped produce a set of videos that you can sit at your desk and learn about CRA. And then just think of that as another tool and another relationship to bring to the table as you’re being innovative around Opportunity Zones.

Jimmy: Well, that’s great and that’s a good thing to keep in mind that change like this does not occur quickly, we just went through a regulatory process with Treasury and the IRS with qualified opportunity funds. That was a two-year process from when the statute was passed until when final regs were issued by the IRS.

So I can only imagine that CRA with three different agencies involved could take a quite a bit of time as well and then, as you mentioned, the ability for the banks to adopt the strategies and get educated on the new regs and non-qualified opportunity funds can take some time as well. So, definitely not a quick turnaround by any means but certainly some momentum in the right direction, I hope.

Jeanne, thanks for the conversation today, it has been terrific. A lot to think about in terms of community development and how banks can get involved and how developers and investors can leverage banking institutions for making a big impact in Opportunity Zones. Terrific talking with you today. Before we go, Jeanne, can you let our listeners know where they can go to learn more about you and the Invest to Sustain Initiative at UNC?

Jeanne: Yes. So, you can go to kenan-flagler.unc.edu, that’s the business school at UNC. And you can find Invest to Sustain there and my contact information and I’ll, of course, provide that to you to cross-post as well. And I’m always interested in talking to people about their projects and offering any assistance that we can.

Jimmy: Perfect. Thanks, Jeanne. And for our listeners out there, I will produce show notes for today’s episode on the Opportunity Zones Database website, and you can find links to all the resources that Jeanne and I discussed on today’s show. I’ll be sure to link to the Kenan-Flagler Business School. And I’ll have Jeanne’s contact information on there as well. And you can find those show notes for today’s episode at opportunitydb.com/podcast. Jeanne, thank you again for joining me today. It’s been great.

Jeanne: Thank you so much. Enjoyed it.