62 Iowa Communities Qualify For Targeted Investment As 'Opportunity Zones'

May 22, 2018

Federal officials have selected 62 Iowa communities  for a new Opportunity Zone program. The effort is meant to encourage investment in underserved areas. But Iowa officials say they're still waiting for more details on how the program will actually work.

Credit Mike Fritcher via flickr creative commons / https://www.flickr.com/photos/mikefritcherphotography/28345182261/in/photolist-YaC8mq-6Kpc5g-iZdW55-J8XkmS-axeGbk-26QwzgE-JKtZ1s-cZGHow-cZGHvu-P51BXw-Pcu4pu-NhAr6x-NZebRo-BJjbh-4MzPnm-JF4FM-4NigoN-QmtcLo-HzGfZK-FC9jEG-G2sQzj-Fb15fq-FFkzTh-FcS3jf-stNvQ-JYi

Under the plan, investors will be able to defer taxes on unrealized capital gains, if they invest in what are called opportunity funds. These private funds will in turn be invested in specially selected census tracts known as opportunity zones. In order to qualify, these areas must have poverty levels of 20 percent or greater, or family incomes less than 80 percent of the area's median income.  

Iowa League of Cities Executive Director Alan Kemp said this kind of targeted investment in disadvantaged neighborhoods is novel.

“And I think that’s the real benefit of it. I think cities can see benefit," Kemp said. "They could see investment in new businesses or existing businesses that they might not otherwise be able to take advantage of."

But Kemp said the success of the new federal program depends on how it’s implemented. The U.S. Treasury Department is still developing rules for investors and local agencies.

Iowa Economic Development Authority Director Debi Durham is also waiting for the rules to be finalized. Her agency helped process the applications from local officials. She expects this new funding stream could benefit a broad swath of potential recipients. 

"So what we anticpiate that that means anything from any kind of infrastructure investment, business investment, housing structure...anything, that would really qualify, I would think, as an economic driver," Durham said.

Iowa administers a somewhat similar program that offers tax breaks in exchange for targeted investment. Based on the success of the Angel Investor program, Durham said the Opportunity Zones initiative has potential.

"We find that we have a waiting list of people that want to invest and there's no shortage of companies in Iowa to invest in," Durham said, referring to the Angel Investor program. "Just seeing how successful that program is, I think that this could really – again, implemented correctly – could really propel forth some pretty transformational projects around our state.”

Durham also believes the efficacy of the program will depend on how it's structured. Particularly in smaller or rural communities, Durham said local governments may have a harder time finding the resources to connect potential investors with potential recipients. Durham and Kemp both said their organizations will work to fill that gap.