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Opportunity Zones in Texas: Promise and Peril

October 2018

Looking Forward

While there are still open questions about how O-Funds will be created and by whom, some basic guidelines are in place: Any taxpaying person or entity can create a fund, but it must be organized as a corporation or a partnership and invest at least 90 percent of its assets in OZs. Funds can invest in multiple OZs at any given time, and there is no cap on the size of the funds or their investment levels. Similarly, there is no geographic requirement; funds located in one OZ may invest in another. And simply being designated an OZ does not guarantee investment; O-Funds have the say in where to make equity investments, suggesting that cities and states may want to incentivize prospective investors.

Opportunity Zones are estimated to go into full effect late this year or possibly early 2019.[1] As state and city governments, community development professionals and investors await forthcoming guidance from Treasury, policy groups will continue to think through best practices to maximize impact and minimize displacement. OZs have potential to direct much-needed capital to historically underinvested neighborhoods and spur longer-term investments of at least a decade. They also have potential to open doors for a new wave of investors who might not otherwise have the networks or incentives to invest in low-income communities. But without reporting requirements, it could be difficult to discern the program’s efficacy or track how it might contribute to furthering gentrification and displacement in neighborhoods at risk. At the end of the day, Opportunity Zones are here to stay—at least for the next 10 years. It’s now up to cities, states and economic developers to cultivate best practices for inclusive and effective development.

Notes
  1. “Opportunity Zones Program: An Early Overview of Program Details and What’s Ahead,” by Rachel Reilly Carroll, Enterprise Community Partners, January 2018.
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