Guest Post: Putting the Opportunity back in Alabama
For decades, Alabama has been chronically underserved by traditional community development financing tools — but with the advent of Opportunity Zones, catalytic capital is within reach.
Only one Alabama-based community development entity (CDE) has received an award of New Markets Tax Credits in the last decade. Only two states have received fewer CDFI Fund financial and technical assistance awards (which support the development of community development financial institutions) per capita than Alabama. Even national philanthropy has shied away. From 2010 to 2014, Alabama averaged only $130 per capita in grantmaking; compared to $204 per capita in Mississippi; $329 per capita in Georgia; and a national average of $451 per capita (with a whopping $1,966 per capita in New York City).
We saw Opportunity Zones as a chance to address the access to the capital gap we have experienced here for far too long — and we moved quickly. In October 2018, we formed Opportunity Alabama (or OPAL, as we like to call it), a new kind of community development entity with big ambitions. We’re a 501(c)(3) organization specifically dedicated to building an ecosystem to support catalytic development in low-income communities. That ecosystem is centered on using Opportunity Zones as a tool to drive equity into projects (and, very soon, businesses) that might otherwise be overlooked.
We tasked OPAL with the mission of building a statewide “Opportunity Zones Ecosystem” comprised of communities, project sponsors, investors, and third-party supporters (like bankers, accountants, attorneys, universities, economic developers, community foundations, and others). Our goals are fourfold: (1) build capacity within the ecosystem to understand the program and capitalize on it, (2) identify community assets and build marketing strategies around those assets, (3) connect our ecosystem members (from projects to investors to communities to professionals), and (4) track data on whether (and how) our efforts are having an impact on low-income communities and their residents.
In Alabama, every county has at least one Opportunity Zone, many of which have not seen substantial third-party investment for quite some time (especially in rural areas). In these places, our capacity-building function takes on a whole new dimension. We use the excuse of building an OZ marketing document to draw the entire local ecosystem together and have a substantive, ongoing conversation about why the community will be a stronger, better place ten years from now. That strategy is already working in places like East Alabama, where a group of two counties and three cities have set aside their differences and are coming together to build a strategy (and market themselves) as a region.
As we continue to build our $200 million plus pipeline of investable projects statewide, we are finding that there are quality projects everywhere, even in the most rural of places. In Heflin, Alabama (population 3,500), there is a 56 unit, shovel-ready senior care facility that — once New Markets and Historic Tax Credits are added to the capital stack — has the potential to produce close-to-market returns on an incredibly high impact project. In Fayette (population 3,817), there is a $5 million, two-building project in historic downtown that will bring life to a structure that hasn’t been occupied in over 50 years (and solve a housing shortage at the same time). And in unincorporated Macon County, there is a truck stop with a small gap in its capital stack that a local investor may close thanks to Opportunity Zones.
Unfortunately, what we’re finding is that the last example — local capital for local projects — is the exception rather than the rule. Local investors simply don’t have the time or the energy to form funds, identify projects, or diligence pro formas. We are committed to closing that gap in 2019 by offering pre-formed, pre-vetted products for investors so that more local capital can find a home locally.
This is a journey, and an exciting one at that. There’s a huge amount of work to be done in order to ensure the benefits of Opportunity Zones can be realized across Alabama. However, my main reflection to date is that this small part of a bipartisan tax act has done more in the last 15 months to mobilize investors and communities across the state than any other federal tax incentive in the last 15 years.
A native of Northern California (but a naturalized Alabamian), Alex received undergraduate and masters degrees in economics from the University of Alabama and his J.D. from Washington and Lee University School of Law. He has dedicated his career to promoting and supporting economic development in Alabama.