The new Opportunity Zone (OZ) tax program is anticipated to provide billions of dollars of new investment to low-income communities throughout the nation. Knowledgeable observers anticipate that much Opportunity Fund capital will be invested in gentrifying communities in growing urban areas. In addition, smaller cities such as Louisville KY, Cincinnati OH, and Erie PA have already developed robust strategies to attract Opportunity Fund capital. Rural OZs are at a distinct disadvantage in attracting this financing as they 1) have fewer resources to enable them to develop community strategies and package transactions to potential investors, and 2) have investment opportunities that often provide lower rates of financial return then do faster-growing cities.
Opportunity Appalachia is working with a group of 16 projects in rural Central Appalachia (OH, VA, and WV) to provide technical assistance and structure financings with social and financial returns, bringing new investment and jobs to hard hit rural communities in federally designated Opportunity Zones. After a year-long effort to provide design and architectural support, complete market assessments, develop business plans and prospectus, and facilitate investor introductions, 7 projects have identified financing sources and are anticipated to close on +$100M in 2021-22, creating more than 745 jobs in coal-impacted communities. An additional 6 projects are likely to be financed later in 2022 at +$140M resulting in the creation of +270 quality jobs. As part of our efforts to maximize impact, many of these jobs target persons in recovery from substance abuse in our Appalachian coal communities.
These projects were drawn from a group of 42 applicants, and were selected for participation based on factors such as level of community support, anticipated community impact, and sponsor capacity. In all cases, the selected projects were missing critical components required to move forward, but all had substantial promise to transform their communities. Participating communities include places like Chillicothe, Ohio (population 21,700), Galax Virginia (pop 6,700), and Grafton, West Virginia (pop. 5,000) – promising places overlooked by conventional financial institutions. The participating projects support manufacturing facilities, downtown development, tech business, agricultural facilities, hotels / housing, broadband deployment, and retail enterprises, and are particularly important at this challenging time as local economies look to restart as public health concerns resolve. (See project portfolio, below).
Central Appalachian Opportunity Zones – Ohio, Virginia, West Virginia
To advance these local efforts we assembled project technical assistance (TA) teams that worked with each community to address identified gaps. The teams were composed of local, regional, and national TA providers, and included market research groups, state-wide architectural and engineering firms, regional CDFIs for financial structuring support, specialized consulting groups focused on select industries (broadband, recreation, ag …), and leading national development organizations (eg National Development Council). In addition, Main Street America (a preeminent national downtown development organization) and Coastal Enterprise Inc (a prominent national rural development CDFI) served on our program Steering Committee as national partners, providing invaluable guidance throughout the process. (See Archive for details)
As we undertook this work, we reached out to over 40 private investors and federal and state agencies, facilitating investor access that was otherwise unavailable to our rural projects. Presentation of pre-vetted projects to specific investors with a strategic fit, and providing highly visible access across multiple platforms – eg the Federal Reserve Bank Investment Connection, Opportunity Exchange, CDFA, and our Opportunity Appalachia sponsored Investor Convening pitch event – were important to successfully reach, and create credibility with, the investor community. As a result, participating projects have identified financing from a diverse range of sources including OZ QOFs, NMTC CDEs, HTC investors, CDFIs, banks, and federal agencies. (See Archive for details).
Some lessons learned include:
The program is a Forbes Opportunity Zone 20 Catalyst https://ozcatalyst.org/ , which denotes a top national example of community-focused efforts to revitalize distressed communities. Opportunity Appalachia is supported by a $1MM POWER grant from the Appalachian Regional Commission with additional support from the Benedum Foundation, and is managed by Appalachian Community Capital, a 23-member CDFI intermediary whose members and their affiliates manage over $1 billion in assets supporting economic development in Appalachia.
Opportunity Appalachia Project Portfolio:
The following projects have been selected for the Opportunity Appalachia program. (Investment Prospectus and pitch deck are available at Opportunity Exchange)
The Opportunity Appalachia Steering Committee is comprised of the following six regional and national organizations:
Lead State Partners – Lead Community Development State Partners
National Technical Assistance Providers
In addition, in each community/state there are capable partners that can be engaged to support OZ activities at the local level. Local OZ communities may select these local partner organizations to provide technical assistance for their OZ efforts, may select other capable and vetted regional or national organizations, may select the above Lead State Partners or National Technical Assistance Providers for this support, or some combination thereof. Local Partners can be engaged as needed/requested by local OZ communities.
State collaborators and planning partners informing activities in each state include:
Ohio: OhioSE, Governor’s Office of Appalachia, Ohio Development Services Agency, Ohio University Voinovich School of Leadership & Public Affairs, Buckeye Hills Regional Council, Ohio Valley Regional Development Commission (OVRDC), Ohio Mid-Eastern Governments Association (OMEGA) and Eastgate Regional Council of Governments.
Virginia: UVA-Wise, LOCUS, Opportunity Virginia, VA Department of Housing and Community Development, LENOWISCO Planning District Commission, Cumberland Plateau Planning District Commission, Thomson Charitable Foundation, City of Wise, People Inc, Coalfields Economic Development Authority, Virginia Community Capital.
West Virginia: WV Community Development Hub, West Virginia Development Office, WV Municipal League, New River Gorge Development Authority, Advantage Valley, City of Huntington, City of Charleston, WV Forward, WV Brownfields Center, West Virginia University, U.S. Senators Manchin and Capito offices, Benedum Foundation.
More information on Opportunity Zones