Columbus Dispatch -- Pat Tiberi Column: Opportunity zones can revive struggling neighborhoods
The Great Recession of 2007-2009 was brutally tough on Ohio. During this two-year period, Ohio saw hundreds of thousands of jobs lost, thousands of businesses shuttered, 10 percent unemployment and entire communities devastated.
In the 10 years since, Ohio has recovered the jobs it lost, but the recovery has been frustratingly uneven and many economically distressed communities, particularly in metro and rural areas, have fewer jobs and businesses today than they did in 2000.
Interestingly, a small handful of cities and regions have proved to be immune to the struggles facing much of Ohio. The top five metro areas in the nation — New York, Miami, Los Angeles, Houston and Dallas — have together produced the same net increase in new businesses as the rest of the country combined since the recession ended. By stark contrast, in countless metro and rural areas across Ohio and the country, businesses are still closing at a faster rate than they’re being created. These urban and rural communities are stagnating and desperate for private capital investment to create businesses and spur development.
One potential antidote to this problem? Utilizing the tax code to unleash capitalism and incentivize investment in the form of opportunity zones.
While serving in Congress, I authored bipartisan legislation, the Investing in Opportunity Act, which was designed to address the lagging investment rate of private-capital dollars into our inner cities and rural communities.
Specifically, my bill, which was signed into law as part of the tax-reform package earlier this year, removes barriers to investment through a temporary capital-gains deferral in exchange for reinvesting in distressed communities and provides a new way for investors across the nation to pool resources through newly created “opportunity funds,” established specifically for making investments in distressed communities. The bill concentrates capital by establishing “opportunity zones,” geographically targeted low-income areas designated by governors and encourages investors to make long-term commitments to these communities by tying incentives to the longevity of the investment.
U.S. investors currently hold trillions of dollars in unrealized capital gains in stocks and mutual funds alone — a significant untapped resource for economic development. Opportunity funds, which are private-sector investment vehicles that invest at least 90 percent of their capital in opportunity zones, provide investors the chance to put that money to work rebuilding the nation’s left-behind communities. The fund model will enable a broad array of investors to pool their resources in opportunity zones, increasing the scale of investments going to underserved areas.
With the new law in place, Gov. John Kasich in April designated 320 historically distressed census tracts across Ohio as opportunity zones, making them soon eligible for investment from qualified opportunity funds, once the U.S. Treasury Department finalizes the rules. Soon thereafter, communities across the state that have been historically unable to attract private capital will become a lucrative option for investors, who will now be incentivized to move their capital off the sidelines and reinvest it long-term in places starving for it.
It has been 54 years since President Lyndon Johnson launched the War on Poverty, and despite this noble-but-massive governmental effort to help the poor and poor communities, both the poverty rate and the number of Americans living in poverty remain stubbornly high. But with the creation of opportunity zones, capitalism and the pursuit of profit might now be the remedy to curtail generational poverty in some of Ohio’s most economically distressed communities.
Pat Tiberi, a Genoa Township Republican who represented central Ohio’s 12th Congressional District for 16 years, is president and CEO of the Ohio Business Roundtable.