Up to five projects in communities across the state will receive technical assistance resources that are valued, on average, at around $50,000 under the federal Tax Cuts and Job Act of 2017.
The Tax Cuts and Jobs Act of 2017 created “Opportunity Zones” as a move to provide tax benefits for those who invest in the qualified Opportunity Zone – an economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment.
Under federal law, states may designate up to a quarter of low-income Census tracts as “Opportunity Zones.”
The move gives investors a dodge on capital gains taxes which are charged on the profit of a sale of a non-inventory asset such as a stock, bond, real estate, property or precious metals.
One such “Opportunity Zone” is Opportunity Appalachia, which focuses on providing technical assistance to teams working to make the Opportunity Zone projects around the country “investment-ready.” Opportunity Appalachia is “a group of 15 to 20 OZ communities in Central Appalachia, providing technical assistance to both develop community strategies and structure investable transactions, creating prospectus and pitch decks targeting Opportunity Fund (QOF) Investors,” states the Appalachian Community Capital (ACC) website.
“Once these prospectuses are complete, outreach to Opportunity Fund investors – including the hosting of a highly visible investment event – to review a portfolio of OZ investments in Central Appalachia that provide both robust social and sufficient financial return.”
Headquartered in Christiansburg, Va., ACC is a community development financial institution (CDFIs), which shares a common goal of expanding economic opportunity. A CDFI gives local businesses and residents access to financial products and services by raising capital and lending to member organizations.
Those organizations make loans to small business owners and entrepreneurs in Appalachia.
Investment into Opportunity Zones comes through Qualified Opportunity Funds, explained Emma Pepper, director of Strategic Network Communications at WV Community Development Hub.
“Investors into Qualified Opportunity Funds may be local or from anywhere in the U.S.,” Pepper reported. “Fund managers, or the people managing Qualified Opportunity Funds, will match investments with existing projects.
“The Opportunity Appalachia program is focused on providing the technical assistance to the teams working on these projects so that they are investment-ready.
“It is anticipated that investments into Opportunity Zones across the country will be largely focused in urban areas,” she added. “The teams of people behind Opportunity Appalachia are aiming to better position projects in rural communities to receive investment, but the impact of this program goes beyond the dollars that may come as a result of investment into Qualified Opportunity Funds.”
In the short term, up to five projects in communities across West Virginia will receive technical assistance resources that are valued at, on average, $50,000 each, according to Pepper.
“They will join residents from Ohio and Virginia, taking part in the program to form a peer network that speaks the same language and shares similar skill sets,” Pepper said. “In the long term, Opportunity Appalachia projects will be better positioned to strategize around, go after and utilize investments.
“Opportunity Zones are just one moment in time for these communities, and we’re doing everything we can to leverage this potential investment opportunity, but we’re ultimately interested in building the capacity of community teams into the future so they can be best positioned to attract and utilize investment to spark economic development in West Virginia towns.”
It is projected that $7.5 million in investments through Qualified Opportunity Funds could potentially come to Central Appalachia as a result of this initiative, and the teams behind Opportunity Appalachia will be working with participants in the program to prepare and attract this level of investment, Pepper added.
During the selection process for the program, projects that include structure and strategies around incorporating addiction recovery and treatment services will receive special consideration.
ACC received its CDFI certification from the U.S. Treasury Department in 2016, according to the website.
Several foundations and partners made a $15.5 million seed capital investment to start ACC, including the Appalachian Regional Commission, a regional economic development agency that Congress established in 1965 to invest in economic opportunities, a ready workforce, critical infrastructure, natural and cultural assets and leadership and community capacity.
Between 2015 and 2016, ACC deployed $11 million of the $12 million in leveraged debt. Members report to the website that they have financed close to 70 loans for small businesses and have helped to create or retain more than 1,800 jobs, with over half being held by those with low incomes.
The remaining $1 million in capital commitment was tapped in 2017 for making small business loans in rural Georgia, according to the ACC site.
Opportunity Appalachia is projected to bring $7.5 million in capital to 15 targeted OZ communities in West Virginia, Virginia and Ohio, according to the ACC site. The capital will structure investments in businesses and real estate projects “that support strategies for economic restructuring and diversification, which will create 720 new jobs.”
Ten percent of the jobs are projected to be for those who are in recovery for addiction, the site states.
“Investment priorities include projects focusing on downtown development, manufacturing, IT, healthcare, education, food systems, clean energy, heritage tourism, and recreation,” the website states.
Partners listed on the site are ACC, Coastal Enterprises, Main Street American, Opportunity SWVA, The Hub and APEG (Economic Development in Eastern and Southern Ohio).