I wrote to Gov. Gavin Newsom a few weeks ago, inviting him to visit Bakersfield. You may have read the letter; it was published in this newspaper.
He has not yet responded, but I happened to run into him at Stanford University.
Last week, I attended an Opportunity Zone Investor Summit in Palo Alto. But don’t let the lofty location fool you: This was a conference focused on revitalizing overlooked middle-American cities much like Bakersfield or in overlooked neighborhoods within larger metro areas. It was encouraging to see developers and community leaders piecing together clever deals to grow and shape struggling areas in cities across the country, including east Austin, Texas; southwest Atlanta; downtown Lancaster; Baltimore; and Erie, Pa.
Under the Tax Cuts and Jobs Act of 2017, a new community development program, the Investing in Opportunity Act, was passed with overwhelming bipartisan support as it is intended to encourage long-term investments in low-income communities nationwide. As a part of the act, each state governor has designated up to 20 percent of its low- and moderate-income census tracts as opportunity zones.
The Opportunity Zone program provides a tax incentive for investors to re-invest their unrealized capital gains into Opportunity Funds that are dedicated to investing into opportunity zones designated by the chief executives of every U.S. state and territory. (Full regulations on the program are set to be released soon, some experts guess within a few weeks.)
At the summit, Newsom spoke about his administration's commitment to align state law with federal opportunity zones in order to ensure that capital-rich California reinvests in itself. He spoke about coastal California and how if it were its own state it would be the wealthiest per-capita state in the country, and how the Central Valley would be the poorest. This dichotomy is astounding.
He reiterated his commitment to providing more housing and green infrastructure as explained in his State of the State address in February.
Although policies can lay the groundwork for change, it takes practitioners on the ground to bring them to life. What inspired me the most at the event was hearing from speakers about cross-collaborations between cities, local governments, elected officials and those in the private sector, such as finance experts, investors and consultants. My husband, who has spent his career in commercial real estate, was particularly impressed by the willingness of capital providers to utilize opportunity zones as a basis for putting together non-traditional real estate developments.
These sort of clever problem-solving tactics could help un-concentrate our economy, particularly our startup and innovation economies.
I kept hearing over and over at the summit the word “inclusive.” Proponents hope the program will serve to generate local wealth creation in places that have historically been left behind. And it got me thinking: Venture capitalists tend to want to invest in more established tech hubs like San Francisco/Silicon Valley, New York City and Boston. There is a broken infrastructure of getting capital into other communities. But what if the Opportunity Zone program could help shift that a bit toward non-coastal or secondary markets?
One example that I keep retelling is the “street corner model.” Ross Baird, author of “The Innovation Blind Spot”, spoke about creative solutions to bring capital to underserved areas. One example he gave took place in a distressed neighborhood in Atlanta. Four different properties on four corners of an intersection were transformed. Existing buildings on the four corners were either demolished or repurposed and new tenants (some of which were purely viewed as community-serving such as a daycare center) were brought into the project. The development was guaranteed by a major philanthropic foundation and packaged into one real estate loan for the mix of uses.
Los Angeles Mayor Eric Garcetti stated at the Summit, “We hope to take this country back, one block at a time.”
Opportunity zones are areas rich in assets, just a very different set of assets. These zones, like downtown Bakersfield, are often located in central areas that are developing and have gained some investment momentum, are proximate to public transit and provide vacant infill sites. It is often more affordable for investors to break into the market in these locations.
A central theme at the summit was the importance and efficacy of concentrating capital within emerging neighborhoods and utilizing local investment to maximize community impact. Interdisciplinary projects and collaborations I have been involved with to revitalize downtown Bakersfield seem to prove these very facts. The program encourages and makes more feasible building anchors that are intended to transform overlooked neighborhoods in urban areas. These transformational developments are aimed at setting off a cascade effect, catalyzing additional investment around these anchors.
I will be following developments to the Opportunity Zone program in the coming weeks as further regulations are released and will keep you updated on the progress of the impact this legislation may have on our own community.