In this keynote address from OZ Pitch Day Fall 2022, Shay Hawkins takes a look back at the first few years of the Opportunity Zone program and predicts what may lie ahead.

Webinar Highlights

• Shay’s expectations for the OZ policy when he was drafting the legislation as a member of Senator Scott’s team;
• A brief history of the OZ legislation as a bipartisan, bicameral piece of legislation;
• How the immediate uptake of the OZ program exceeded expectations by a huge margin to become one of the most impactful community develop policies in history;
• Key metrics highlighting the success of the program in attracting debt and equity investment into Opportunity Zones;
• How the Opportunity Zone program is resulting in decreased poverty rates in both rural and urban areas;
• The potential for proposed legislation to improve visibility into job creation, poverty reduction, and other metrics;
• Stories of successful Opportunity Zone projects from around the country;
• How proposed legislation will continue to improve the OZ program.

Featured On This Episode

• New Legislation Would Extend and Improve Opportunity Zones
• Map of Opportunity Zones

Today’s Guest: Shay Hawkins

• Shay Hawkins on LinkedIn

Industry Spotlight: Opportunity Funds Association

The Opportunity Funds Association is an advocacy, education, and communications organization established to enable Opportunity Fund managers and investors in Opportunity Funds to participate in public policy, share best practices, and communicate the industry’s contributions to distressed rural and urban communities across the country.

Learn More About OFA

• Visit ZoneFunds.org

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.

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Show Transcript

Jimmy: The Opportunity Zones policy was enacted nearly five years ago as part of the 2017 Tax Cuts and Jobs Act. In July of 2018, the Treasury Department certified over 8,700 census tracts all across the country as qualified Opportunity Zones and the first qualified opportunity funds were launched. OZ investing may just be the greatest tax incentive ever created. The policy has the opportunity to become the largest economic development program in U.S. history, and already over $100 billion of equity has flowed into thousands of qualified opportunity funds over the course of just the first four-plus years of the program. Welcome to OZ Pitch Day, fall 2022. I’m Jimmy Atkinson, founder of OpportunityDB and host of the “Opportunity Zones” podcast, and I’ll be your host for today’s live online event.

Our keynote address will be delivered by Shay Hawkins, founder and president of the Opportunity Funds Association. The Opportunity Zones Program has been a massive success and Shay’s experience gives him a unique perspective on its success story. As tax policy advisor to Senator Tim Scott from 2017 through 2019, Shay played a key part in the passage of the Opportunity Zones provision in the 2017 Tax Cuts and Jobs Act. Now, post-implementation, his role as founder of the Opportunity Funds Association allows him to work closely with fund managers who were deploying capital into Opportunity Zone communities all over the country. And unfortunately, Shay was not able to be here with us live today. He had another commitment come up last minute, but he was able to record his address with me recently. And in his address, Shay will touch on his initial expectations for the Opportunity Zones policy, identify why the policy has been so successful thus far, and also touch on the future of Opportunity Zones. So, without further ado, here’s Shay Hawkins with today’s keynote address.

Shay: Jimmy, thanks for having me. It’s always a privilege to be involved in events for OpportunityDB. A number of the members of my trade association, the Opportunity Funds Association, are also gonna be involved later this afternoon. So, very excited, you know, to join you guys today. And just wanted to talk a little bit, you know, about what some of my expectations were for the Opportunity Zone policy as a member of Senator Scott staff and we were drafting it. Wanna talk a little bit about some of the macro performance of the policy, you know, kind of in relation to those expectations. And then wanted to talk a little bit about some of the potential future of the policy very briefly. And so, you know, the Investing in Opportunity Act was the basis of the Opportunity Zone legislation that we passed in tax reform.

The Investing in Opportunity Act was a bipartisan bill, 44 Republicans in the house, 44 Democrats in the house, and seven and seven, seven Democrats and seven Republicans in the Senate. So, bipartisan piece of legislation from the very beginning, that’s important to note. And in tax reform, the score for Opportunity Zones, you can look at that as the amount of money over 10 years that the policy is expected to cost the government in terms of lost tax dollars. You know, whenever you give some kind of tax break, there’s a cost. And so, in any case, the score was about 1.8 billion over 10 years, which is to say that that’s how much tax revenue the federal government would lose that, you know, they would’ve otherwise theoretically had.

And so, within a couple months of passage of the Opportunity Zone policy, outside folks were already rescoring that number at 7.8 billion, right? So, the uptake was immediately over and above what we expected it would be. You know, this policy was a relatively small priority in tax reform. You know, it was Senator Scott’s top priority, but in terms of a $1.5 trillion bill, it was relatively small and now has really become one of the most impactful community development policies in history. I call it a policy, not a program because the federal government is very hands-off in this policy by design. And so, you know, we’re very excited. You know, we hoped is that in a couple key rural areas and urban areas that were experiencing economic distress, you know, we could make those residents or certain portion of those residents better off through better jobs, through better access to entrepreneurs and products and services that they wouldn’t otherwise had access to through rise in property values, through better quality of life, through reduced crime.

And so, you know, the scale, you know, is what really, you know, has impressed us. You know, when you look at the amount of equity that’s been raised for deployment in Opportunity Zones, you’re looking at a hundred billion dollars that’s been raised for deployment, and that’s not including what’s gonna be levered up. Well, the debt side, you know, in terms of investing, I mean, we have members of our trade association that alone, you know, have put, you know, a quarter of a billion dollars to work in Opportunity Zones. And so, very impressive effort, very impressive leaders in the space amongst a number of industries. And so, we’ve been just extremely excited about what we’ve seen. The GAO did report a couple years back, but they estimated that $75 billion were coming to the zones over 10 years, and that a million Americans would be lifted outta poverty, and that the poverty rate within Opportunity Zones would be reduced by 11%.

And so, so far, we are really blowing right through those predictions, you know, in terms of the capital that’s deployed and through legislation that was proposed by Senator Scott and Senator Booker from New Jersey, and co-sponsored on the House side by Congresswoman Terri Sewell from Alabama and Congressman Mike Kelly. Through that legislation, we will be able to get some transparency and some studies from the Treasury Department aided by, you know, folks at like…you know, back in fund administrators like the folks at JCT Americas and others. Those folks will be able to put together data that lets us know exactly how many folks are lifted out of poverty, exactly how many jobs are created, and gives us an even broader view of the potential impact in its policy. And so, we’re just really excited.

You know, on a more micro level, there’s folks, you know, that are members of, you know, of OFA, you know, that are really doing some impressive stuff across the country. I’m thinking of like the BridgePort Group based out of Cleveland, Ohio, and also operating in Florida and on the East Coast. These folks are using Opportunity Zones to build out a minority and veteran-owned business that will be a distributor, a major distributor in the growing healthcare space in Cleveland. And so, this is exciting because, you know, there’s a very disruptive movement towards online pharmaceutical distribution. And so, this will allow a minority and veteran-owned opportunity zone business to really become a part of that distribution in physical delivery and through warehousing, you know, in Opportunity Zones.

You know, I think about, you know, in terms of completed projects and ribbon cuttings as it were, I think about Revitate and Alex Bhathal, you guys will have him on, I think, later this afternoon. But in any case, those guys, you know, cut the ribbon last year on a great project in San Bernardino County where they built out a facility for the San Bernardino County Department of Children’s Behavioral Health. I mean, beautiful facility and a beautiful partnership with the public sector to private sector in Opportunity Zones. Just coming together, Senator Scott went out there to cut the ribbon and it just was a great project. We were looking at groundbreakings in the beginning of projects. You know, I think about a great project down in Panama City, Florida where, you know, another one of our members, the St. Joe Company actually in partnership with the City of Panama City have leased land from the city right there on the marina to develop a hotel and restaurant. And so, they’re leasing the land which is owned by the city, and so the city is seeing immediate revenue today as we break ground.

But the agreement is structured where once the hotel is built and the restaurant and St. Joe Company sees additional revenue from the hotel and restaurant, the lease payments adjust upwards. And so, hundreds of construction jobs, obviously, in the building phase, which is happening as we speak. And then obviously, in addition to that, we’re gonna see hundreds of people employed in the restaurant and, you know, in the hotel. And so, just, you know, a great win for local government, for the State of Florida, and for, like I said, one of our members, the St. Joe Company. And so, you can multiply these projects, you know, over and over. You know, you guys have a great database where some of these projects are actually highlighted. And, you know, it really speaks to the impact that Opportunity Zones has, you know, that’s just outsized and above what you see in a lot of other community development policies, but also even compared to our initial expectations when we’re passing the policy.

And so, it’s really exciting. You know, politically, you know, we’ll see going forward, we are very hopeful that we will be able to pass in this lame-duck session. You know, now that the election’s over and the swords have been put away, you know, we are really hoping that we can get some bipartisan agreement to pass the Opportunity Zone expansion and transparency bill that was introduced in April of this year. And I know you have some folks that are gonna talk about that bill in more detail, but essentially, you know, it would expand the Opportunity Zone policy by two years. It would allow for some basic transparency and reporting to allow us to understand how Opportunity Zones are impacting distressed communities and how they can better impact those communities with adjustments. It will allow for a fund-to-fund structure so that opportunity fund managers can invest in other opportunity funds. It’ll provide about a billion dollars for education for local governments on how to best utilize Opportunity Zones and how other communities are utilizing them.

And then finally, in a small handful of very high-income zones, it will say that if you have an investment in those zones, today you’re fine, but going forward, you know, governors in those states where those zones are gonna redesignate those zones and are gonna be allowed to pick new zones in those states where people can invest and benefit from the policy. So, you know, we are very hopeful, you know, with the Republicans having taken the house, but not having taken the Senate in this case at this time, you know, we are hopeful that we will be able to get something done in the lame-duck. You know, with one party having retained control of the Senate but the other party having retained control of the House, it does make some of the negotiations a little more difficult than if it were single-party rule because there’s kind of, you know, if we had had the Republicans take over everything, then we would have the incoming majority kind of negotiating with the outgoing majority, and the playing field going forward will be pretty much set.

So, that just allows for, you know, the sword to get put away and people to move forward. In this situation, there’s a little more uncertainty because the House will be able to present things that the Senate will be able to kind of push back on. But we are still hopeful because this was a bipartisan policy from the beginning, you know, with bipartisan support from the beginning. You know, we’re hoping that we’ll get the sword put away and we’ll get a nice expansion of this really great policy that’s impacted so many Americans and really give us the transparency and reporting that we need to understand how impactful it’s been, you know, and give us a view into how we can make it even more impactful for the current residents of distressed communities.