May 10, 2019

CalOZ Applauds Governor Newsom’s Support for Opportunity Zones in Revised Budget Summary

SACRAMENTO, CA - CalOZ welcomed positive developments for the future of opportunity zones in California reflected in Governor Gavin Newsom’s revised budget summary released yesterday.

"Opportunity Zones are a big part of the budget," said California Governor Gavin Newsom during his press conference highlighting the budget revisions. "We are going to continue our conformity strategies with federal tax code as it relates to Opportunity Zones."

“California can and must be a leader on how the new opportunity zone incentive can further goals for job creation, economic mobility, and community development in areas of our state that need it most,” said CalOZ President and Co-Founder Kunal Merchant. “The revised budget summary represents a positive step in the right direction, but we have more work to do.”

In recent weeks, CalOZ has focused efforts on building support for three specific policy strategies:

1. Establishing clear reporting and transparency requirements for OZ funds and investments so that all parties can track, understand, and analyze the impacts of opportunity zone investments. Senate Bill 315, sponsored by Senate Majority Leader Robert Hertzberg, represents a promising effort in this area.

2. Community sponsorship for tax conformance to empower localities with discretion to offer state tax benefit as an additional incentive for high-impact, high-priority opportunity zone investments. 

3. State support for regional economic development capacity in the form of grants, loans, technical assistance, fellowships, and other strategies to help regional leaders build a steady pipeline of high-quality opportunity zone projects.

The revised budget summary represents progress towards these goals in a few notable ways:

1. Affordable Housing. The May Revision provides $800 million to boost infrastructure development and housing production, intended to leverage additional investment for projects located within federal Opportunity Zones through state and federal tax benefits.

2. Clean Energy. The May Revision supports conforming California’s tax code so that clean energy projects in Opportunity Zones will receive the same state and federal tax incentives. 

3. Tax Conformance. The May Revision proposes to partially conform to the federal provisions on deferred and reduced capital gains for investments in designated California Opportunity Zones. Eligible investments include green technology and affordable housing, with criteria chosen to allow incentives to be layered with Infill Infrastructure Grants to incentivize housing. 

4. State funds for regional capacity building. The May Revision includes $750 million to partner with local governments to increase housing production through technical assistance and general-purpose funding. These funds can better prepare local communities to attract private investment into Opportunity Zones to spur local economic development and shared prosperity.

The budget summary reflects the growing bipartisan recognition by leaders across the state in the power and potential of the opportunity zone incentive. 

Earlier this week, the Big City Mayors Coalition, led by Sacramento Mayor Darrell Steinberg and comprised of Mayors of the 13 largest California cities, submitted a letter of support.

In addition, CalOZ's Green Coalition also submitted a letter of support highlighting the value of opportunity zone investment in promoting the clean economy.

Building on this momentum, CalOZ continues to make the case for a broader tax conformance to accommodate several additional categories of impact investments, including workforce housing; transit-oriented housing; rural broadband; enterprises within Promise Zone neighborhoods; co-working and co-living spaces; incubators and accelerators; businesses founded, run by historically underrepresented communities; enterprises with significant employee ownership structures; and projects with strong community sponsorship as outlined in the Big 13 Mayors support letter. 

recent analysis by California Forward and Golden State Opportunity showed that there is tremendous upside for low-income communities in encouraging Opportunity Zone investments in California – potentially hundreds of millions in additional investments in these local economies.

Additional details on the Governor’s budget are expected shortly. The Senate and Assembly Budget Subcommittees are expected to discuss state policy on opportunity zones in the coming weeks in the lead up to final passage of the budget in June.

For more information, please visit www.caloz.org.

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About Cal OZ

CalOZ is dedicated to maximizing the transformative potential of Opportunity Zones (OZs) in California. By uniting and mobilizing top voices from across California’s investment, development, entrepreneurial, regulatory, philanthropic, and nonprofit communities, CalOZ shapes practices, policies, and platforms essential to the success of this once-in-a-generation community investment tool. Guided by a “triple bottom line mindset,” CalOZ supports policy solutions focused on competitiveness, sustainability, and equity.

About Opportunity Zones

The Qualified Opportunity Zones ("QOZs") program is the largest new community development tax incentive program created in a generation, established by the U.S. Congress in December 2017 through the Tax Cuts and Jobs Act.  

QOZs were designed to encourage patient, long-term investments in low-income urban and rural communities throughout America by providing a powerful new tax incentive for investors with capital gains in the stock market, real estate, and in other assets to reinvest those dollars into special private investment vehicles called Opportunity Zone Funds. Funds can be corporations or partnerships, self-certified with the IRS, that are committed to investing at least 90% of their capital into OZs.

Qualified Opportunity Zones were conceptualized in the bipartisan Investing in Opportunity Act, developed through the leadership of Senators Tim Scott (R-SC) and Cory Booker (D-NJ) and Representatives Pat Tiberi (R-OH) and Ron Kind (D-WI), and ultimately including nearly 100 Democratic and Republican congressional cosponsors. 

In June 2018, the U.S. Department of the Treasury certified over 8,700 census tracts as QOZs  in every U.S. state and territory, designations that will last over a decade through the end of 2028. Per the Economic Innovation Group, QOZs have an average poverty rate of nearly 31%, an average median family income of only 59% of its area median, contain 1.6 million places of business, 24 million jobs, and 35 million Americans. According to the Urban Institute, less than 4% of QOZs are at high risk of rapid socioeconomic change, displacement, or gentrification.

 

March 25, 2019

California Leaders Applaud Launch of CalOZ

New group will promote competitive, equitable and sustainable Opportunity Zone investments in California

SACRAMENTO, CA — Today, top state and local leaders celebrated the launch of CalOZ, a new group dedicated to supporting the success of Opportunity Zones in California.  The announcement follows a series of encouraging developments in the growth of Opportunity Zones (OZs) in California.

“Our state must embrace new strategies to rebuild an upward economy that works for all Californians,” said Kunal Merchant, President and Co-Founder of CalOZ. “Opportunity zones offer an important new tool, not only to promote economic mobility and the green economy in areas of our state that need it most, but also to re-evaluate and re-imagine how business, government, and community work together to foster a more competitive, equitable and sustainable economy in California.”

“Stockton is ready for opportunity zone investment,” said Stockton Mayor Michael Tubbs. “Our community has no shortage of potential – from emerging startups, to our community led initiatives, to our downtown waterfront, our inland port and our workforce development – the list is long. I welcome CalOZ to the dialogue as our city and state work to set the policies and attract the right investors to realize the full potential of this exciting new program."

“Opportunity zones offer an intriguing new pathway for our state to expand our middle class and restore the California Dream for all residents," said Ashley Swearengin, Central Valley Community Foundation's CEO and former Mayor of Fresno. "I’m thrilled to see CalOZ showing leadership on this issue and excited to support their work both in the Central Valley and state as a whole." 

CalOZ’s first priority will be CalOZ for All, an initiative to promote adoption of high-impact state policies regarding opportunity zones, economic mobility, and sustainable growth more broadly. Joining CalOZ will be a range of strategic partners with deep expertise in economic development, public policy, community development, green innovation, and impact investing, including: California Forward, the California Business Roundtable, Central Valley Community Foundation, Bay Area Council, Sacramento Promise Zone, RevOZ Capital, Amalgamated Bank, the Governance Project, Fuse Corps, Accelerator for America, and Nationswell.

Guided by a “triple bottom line mindset,” CalOZ for All will support policy solutions focused in three areas:

  • COMPETITIVENESS: ensure state policies and incentives governing OZs position California as an attractive destination for OZ Funds and projects within the national marketplace.

  • EQUITY: establish strong standards, safeguards, and metrics to protect and empower local communities to drive their own positive economic transformation.

  • SUSTAINABILITY: Leverage OZs to accelerate California’s transition to a green, clean, and thriving economy for all.

“With more than three million Californians residing in opportunity zones, California can and must seize the chance to deploy an unprecedented source of private capital into the communities that need it most, “ said Jim Mayer, President and CEO of California Forward. “We’re proud to partner with CalOZ to support state and local action to ensure California emerges as a national leader in this program."

“Amalgamated is committed to acting as a force for positive change in the communities in which we operate,” said Keith Mestrich, President and CEO of Amalgamated Bank. "Climate change is one of the greatest challenges facing our society, particularly in many California communities designated as qualified opportunity zones. Amalgamated is determined to be a part of the solution, and proud to join with CalOZ in promoting a brighter, cleaner and greener future in California.”

CalOZ will also focus on building infrastructure and capacity at the local level to support the growth of the nascent OZ marketplace, including a potential OZ Fellowship program developed in collaboration with Accelerator for America and FUSE Corps to recruit, train and deploy talented professionals within OZ communities to facilitate investments that build wealth, economic mobility, and the green economy.

“We are committed to attracting investment that supports community and investor goals,” said Tyrone Roderick Williams, Director of the Sacramento Promise Zone at the Sacramento Housing and Redevelopment Agency. “The cross sector partnerships created by the Sacramento Promise Zone provide the perfect platform for attracting and leveraging Opportunity Zone investments.   We are working closely with the city and state on these issues, and having CalOZ as a partner will be a great asset as well.”

CalOZ’s formation arrives at a critical juncture in the development of the Opportunity Zone marketplace in California. As home to over 10% of the nation’s 8,700 Qualified Opportunity Zones, the Golden State is primed to be a leader, or laggard, in the emerging OZ marketplace. Top state leaders, including Governor Gavin Newsom and Treasurer Fiona Ma, have expressed support for Opportunity Zone investment as a new economic development tool to further goals for housing, sustainability, and economic and community development.

CalOZ was co-founded by Kunal Merchant, Managing Director of Lotus Advisory, and David Smith, CEO of X Sector Labs. Merchant and Smith have extensive backgrounds in public-private partnerships, economic and community development, sustainability, civic innovation, and public policy.

For more information about CalOZ, please visit www.caloz.org.

To participate in upcoming CalOZ activities and events, please email info@caloz.org.

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About Opportunity Zones

The Qualified Opportunity Zones ("QOZs") program is the largest new community development tax incentive program created in a generation, established by the U.S. Congress in December 2017 through the Tax Cuts and Jobs Act.  

QOZs were designed to encourage patient, long-term investments in low-income urban and rural communities throughout America by providing a powerful new tax incentive for investors with capital gains in the stock market, real estate, and in other assets to reinvest those dollars into special private investment vehicles called Opportunity Zone Funds. Funds can be corporations or partnerships, self-certified with the IRS, that are committed to investing at least 90% of their capital into OZs.

Qualified Opportunity Zones were conceptualized in the bipartisan Investing in Opportunity Act, developed through the leadership of Senators Tim Scott (R-SC) and Cory Booker (D-NJ) and Representatives Pat Tiberi (R-OH) and Ron Kind (D-WI), and ultimately including nearly 100 Democratic and Republican congressional cosponsors.

In June 2018, the U.S. Department of the Treasury certified over 8,700 census tracts as QOZs  in every U.S. state and territory, designations that will last over a decade through the end of 2028. Per the Economic Innovation Group, QOZs have an average poverty rate of nearly 31%, an average median family income of only 59% of its area median, contain 1.6 million places of business, 24 million jobs, and 35 million Americans. According to the Urban Institute, less than 4% of QOZs are at high risk of rapid socioeconomic change, displacement, or gentrification.