Investors and communities win when they work together
Forbes OZ Summit Series: Mayor Eric Garcetti, Los Angeles, California and Co-founder of Accelerator of America
On May 21, the Sorenson Impact Center interviewed key opportunity zone players at the inaugural Forbes OZ Summit in Newark, New Jersey.
As the 42nd Mayor of Los Angeles, Eric Garcetti has rallied over 400 other mayors to adopt the goals of the Paris Climate agreement within their cities, focused on providing legal resources to immigrants fighting deportation, and appointed LA’s first Deputy Mayor for International Affairs to bolster global economic opportunity. Also on his agenda: working to make sure opportunity zones truly create opportunity in Los Angeles and beyond to foster equitable economic development.
“If this is a platform for us to be more engaged with each other, to learn that indigenous knowledge but also empower those local people, then opportunity zones will be worth it,” Garcetti states.
Development without displacement
There are currently 193 different opportunity zones in Los Angeles, and Garcetti believes they hold possibilities for everyone. As a US manufacturing hub, LA’s OZs offer investors a myriad of operating businesses for investment, as well as real estate. Likewise, with 24% of the city still living in poverty, the need for new capital from investors is substantial. The key to a successful outcome for both parties, Garcetti says, is to ensure development “is done with a conscience – involving local residents in the process, without displacing them, and providing jobs to local people.”
To that end, in 2017, Garcetti founded the nonprofit Accelerator for America with former Fortune 500 executive Rick Jacobs. Accelerator for America aims to scale and model local solutions in transit and infrastructure to promote economic development, and it has advocated for collaboration between communities and investors in opportunity zones. The Accelerator partnered with New Localism Advisors, led by Bruce Katz and the late Jeremy Nowak, to help create its Opportunity Zones Investment Prospectus Guide. It is focused on helping cities across the US utilize opportunity zones for equitable development and organize stakeholders around inclusive growth. The prospectus guide includes an introduction to the Opportunity Zone Tax Incentive, individualized data on cities including assets and opportunity zone locations, and additional resources to harness capital.
The guide reflects Garcetti’s ultimate advice to any mayor or community group interested in opportunity zone projects: “Don’t worry about the size of your town — this comes down to individual projects. Educate, learn and market yourself.”
A place with purpose
For Garcetti, education and community engagement with opportunity zones serve another purpose. Since the incentive went into effect at the beginning of 2018, there have been concerns with wealthy investors taking advantage of the tax incentive. Garcetti acknowledges, “Growing pains are going to happen,” and will likely include “vulture capitalists,” a term for wealthy investors preying on communities.
Garcetti stresses the importance of communities demanding accountability and holding investors responsible. “We need to be defensive as well as offensive in our strategies,” he says. “We have to look for those things where people are coming in to prey on communities and make sure we bring other people in instead.” According to Garcetti, it is crucial to bring voices across sectors and socioeconomic groups to the table in order to foster comprehensive discussions of how development will benefit the community.
In spite of the probable growing pains, Garcetti sees opportunities for proactive communities to bring in the right investors with a collaborative approach — and a compelling case. He reminds us, “We are human beings; we make our decisions with emotions, not just by sharpening our pencils or looking at the spreadsheet. We want to have a place with meaning, we want to have a place with purpose, and we want to go to a place that makes us feel good.”
Garcetti adds the investors can earn higher rates of return, and find more quality projects when they collaborate with governments and communities -- and through engagement, communities can steer capital toward investments that create community wealth. In opportunity zones, he sees a platform for bringing these parties together and addressing both sides of the equation. “It’s a new sort of friendship and relationship that isn’t transactional, it’s more relational.”