Before You Begin
Key Elements of the Investment Prospectus & How to Use This Guide
An Investment Prospectus best acts as a “pre-qualification statement” for a city, providing the economic and governmental context—at the metro, city and Zone scales—to attract capital and drive smart investments. Local entities will need to go the “last mile” and identify and market actual investable projects, providing the first-hand deep knowledge that only exists in each community itself.
Each Investment Prospectus should, at a minimum, do the following:
Set the Context
All Opportunity Zones exist within the broader context of urban and metropolitan areas as well as broader regional economic ecosystems. To that end, an Investment Prospectus should situate the Opportunity Zones on several levels. It should set the economic context for the Opportunity Zones, providing information on driving clusters, sectors, institutions and companies that define the raison d’etre of a given place and unveil the strongest economic growth opportunities given general trends and dynamics. It should explore recent trends in entrepreneurship, company formation and growth and venture funding.
An Investment Prospectus should also act as an introduction to city governance, providing an overview of government structure/leadership, indicating which state and local entities (and who in particular) are in charge of the Opportunity Zone effort and making transparent any local resources and incentives. To the greatest practicable, such information should be made available on a widely promoted website.
Drill-Down into Zones
After setting the context, an Investment Prospectus should present a granular assessment of the competitive position and prospects of each Opportunity Zone. To that end, information should provide specificity on growth dynamics, investment patterns and catalytic projects. To the greatest extent practicable, an Investment Prospectus should clearly show how the attributes of particular Opportunity Zones relate to the contextual macro strengths of the city and metropolis. For example, cities should discuss Opportunity Zones’ strategic location near infrastructure or areas of economic growth, the availability of land and buildings for economic use or the presence of anchor institutions like universities, hospitals and major employers.
Given that “capital follows capital,” an Investment Prospectus should identify public, private and civic initiatives that have already been undertaken in Opportunity Zones. These should include public investments in transportation (e.g., roads, transit) and other infrastructure, company expansions and investments in capital assets, university support for centers of excellence, commercialization and entrepreneurial assistance, the designation of Innovation or other special Districts, the transformation of public or assisted housing, the creation of special high schools or workforce intermediaries, and the design and implementation of “buy-local” procurement efforts by major employers.
Catalyze Inclusive Growth
Given the intent of this tax incentive, an Investment Prospectus should also strive to show how each city is working to maximize economic benefits for low and moderate-income people and places. The Prospectus should, at a minimum, include an analysis of human capital issues in each city/community and show how skill building connects to capital investment dynamics. While there are many dimensions to poverty reduction, cities should focus on how to best increase income across the population by upgrading the education and skills of children and young adults, who will become part of the workforce during the life of this tax incentive.
While the Investment Prospectus will be written for individual cities, it is being developed with a more universal perspective. Investors look for repeated patterns across places—similar spatial geographies, common product types—so that markets can be routinized and friction reduced. New Localism Advisors has created a typology of census tracts across the country that uses the ratio of jobs to residents to unveil the special economies and investment possibilities of distinct urban geographies (e.g., central business districts, anchor districts, industrial districts, airport districts and residential areas).
An Investment Prospectus should rely on objective quantitative evidence as well as qualitative local knowledge. To the greatest extent practicable, it should use readily accessible data that can help investors uncover investable projects and help cities and their stakeholders build inclusive growth strategies and create new (or repurpose existing) institutions to market Opportunity Zones, leverage public, private and civic investments and enhance the linkage of local residents to resulting employment opportunities. The robust use of national data that is locally relevant will also help cities build accountability systems to measure Zone performance and inclusive growth outcomes.
Tips on Creating a Prospectus and Using the Guide
The development of the Investment Prospectus tool in the 5 test cities has already yielded some helpful insights about the design and potential of Opportunity Zones.
It is our firm belief that every city can produce an Investment Prospectus. One way to get started is to establish an Opportunity Zone Task Force led by public, private and civic institutions that delegates responsibilities and firm deadlines. This will ensure that a broad mix of city, anchor and community leaders can build a Prospectus with community input and market the Prospectus and provide additional incentives with community oversight and in accordance with the community vision.
One timely place to start: some 238 cities prepared comprehensive overviews of their assets and advantages as part of the recent competition for the second headquarters of Amazon. We highly recommend that these cities review their bids and use these assessments to inform and build an Opportunity Zone Investment Prospectus. In many cases, cities identified publicly owned assets that could be part of an Amazon campus; many of those assets are located in Opportunity Zones and could find a productive purpose.
We fully recognize that many small and even medium-sized communities face capacity challenges that may impede the creation of an Investment Prospectus. To that end, we highly recommend that a community engage the low-cost services of an entity like PolicyMap. PolicyMap gives cities access to critical data on demographics, real estate, jobs and more and provides easy-to-use online mapping that is a core element of the Investment Prospectus tool. States could also play a critical role in helping small communities design and deploy Investment Prospectuses, either in concert with or separate from an organization like PolicyMap.
Using a Common Template to Communicate Distinctive Assets
Each city should use the Investment Prospectus to project its authentic self, grounded in hard evidence and local knowledge. Each of our test cities, for example, have strong educational and health institutions (“eds and meds”) and experienced a burst of multi-family construction and hotel and amenity development in their downtown and near-downtown neighborhoods. Opportunity Zones were smartly selected to reinforce these common trends and assets and build on smart city investments and strategies. Yet there the similarities end. The Investment Prospectuses for each city reveal highly distinctive economies with diverse histories and pathways for growth and investment, which yield different possibilities for public, private and civic investors.
South Bend, Indiana is a relatively small older industrial city, anchored by a globally significant university growing in scale and impact. The University of Notre Dame is consistently ranked among the best American universities, boasts the 10th largest university endowment in the United States and is rapidly expanding its research base and commercialization capacity.
Erie, Pennsylvania is also a relatively small older industrial city that has a heavy concentration of private and civic institutions—Erie Insurance Company, Gannon University, UPMC Hamot—co-located in the downtown area. In recent years, Erie Insurance has led an effort to create a Downtown Development Corporation with the capacity and capital to drive major regeneration.
Louisville, Kentucky is a competitive mid-sized city and is one of the most successful examples of a city/county consolidation in the United States, yielding a strong fiscal base and solid bond ratings. It has strong traction in hospitality (Bourbonism, Kentucky Derby), logistics (UPS), advanced manufacturing (Ford) and wellness/health care (Humana).
Oklahoma City, Oklahoma boasts a growing economy with outsized positions in hospitality as well as advanced energy, aerospace and health care. For 25 years, its voters have consistently backed—and its business community has consistently supported—a series of public referenda which have invested at scale in the redevelopment of the greater downtown and schools, providing a strong foundation for market growth.
Stockton, California is a moderately sized city that is strategically located near Sacramento, the state capitol, as well as San Francisco and Silicon Valley. Given its location and role as an inland port, the city continues to play a substantial role in production and logistics.
An Investment Prospectus is written initially to unveil competitive assets and attract private capital that is enticed by federal tax incentives. But the Prospectus does not solely focus on private investors. The transactions that most cities seek to drive inclusive growth (e.g., investments in workforce housing and local businesses) will require a blended “capital stack” of debt, subsidy and equity. Cities will, therefore, need to align broader pools of public, private, civic capital and create new forms of innovative financing that can be captured, codified and transferred from city to city. Weak market cities will also need to create business demand by increasing employment density within nodes of Opportunity Zones (e.g., the downtown initiative pursued by Erie, PA). The major observation here is that wealth doesn’t just reside in technology capitals like Silicon Valley or New York City but is distributed across the nation. To this end, cities do not have a capital problem but an organizing challenge and the Investment Prospectus is an impetus for unlocking local wealth and driving smarter local investment and location decisions.
The Investment Prospectus offers cities, in short, an opportunity and format by which to organize how they think about and carry out inclusive economic development. Our hope is that city governments will use the Prospectus to organize their own powers and incentives in ways that advances inclusive growth. Such resources could include zoning, joint ventures, low cost or no cost land, tax increment financing, tax abatements and the like. At the same time, the Prospectus should be a vehicle for organizing private, civic, university and community assets in novel and imaginative ways.
Philanthropies could play a critical role in helping cities design an Investment Prospectus and realize its full economic and social impact. Foundations often possess the community legitimacy necessary to convene disparate urban stakeholders and reach “consensus on reality.” They have the discretionary capital necessary to enhance the capacity of local government, community development enterprises and other local institutions so these organizations can co-create an Investment Prospectus and leverage Opportunity Zones. They have the patient, risk-tolerant capital necessary to invest in Qualified Opportunity Funds, aligned funds or individual transactions. And they have the respect for evidence-driven decision making that is conducive to catalyze, capture, codify and communicate new norms and models as they emerge.
Moving towards Investment Prospectus 2.0 and 3.0
The Investment Prospectuses written to date have relied on quantitative data that is available nationally, primarily from federal agencies. Our view is that we have created an initial platform that is well positioned for further data collection and analysis. We are encouraged that financial institutions like Mastercard have volunteered to build on our initial work and apply their sophisticated data around consumer spending patterns at the census tract level. We also believe that true economic and social impact will be realized only when local data is collected and purposefully applied. For example, the Opportunity Zone Investment Prospectus tool may be a catalyst for cities understanding and displaying information about market relevant information (e.g., public asset ownership) with greater granularity.