Dr. John Fleming
U.S. Assistant Secretary of Commerce
For Economic Development
Intermountain Impact and Opportunity Zone Working Group
University of Utah, SJ Quinney Law School
Salt Lake City, Utah
Tuesday, February 4, 2020 – 12:00pm
[As Prepared for Delivery]
Thank you, Dan, for the kind introduction!
It’s great to be working with you again today!
I’d like to thank:
- The Milken Institute,
- Sorenson Impact,
- Economic Innovation Group,
- Accelerator for America, and
- The University of Utah for convening us today.
And, a special thanks to the University of Utah for hosting us on their beautiful campus!
We have an amazing turnout of national and regional business and economic development leaders here today, which speaks volumes to the importance of the Opportunity Zones initiative to both investors who are making impactful deals and economic developers who are working to help transform our nation’s distressed communities.
Doing good while also doing well has long been a challenge for investors who rightly pursue profitable investments, but also want to improve the world they live in.
Opportunity Zones is proving to be a unique investment vehicle that is helping to do just that.
This Working Group provides an excellent venue for sharing best practices for attracting private investment to these distressed areas.
As an entrepreneur who started a suite of diverse businesses and commercial real estate ventures in 1985, I’m passionate about economic development and the role that government can play in helping foster the conditions for private sector capital investment and job creation.
These businesses, which my family now operate, employ more than 600 people and stretch from central Texas to central Louisiana. I’m acutely aware of the challenges business owners, including those of you here today, face on a daily basis.
I thank all of you for your interest in the Opportunity Zone initiative and I thank you for your participation!
From the first days of his Administration, President Trump has made restoring economic prosperity to our great Nation a priority.
He has been succeeding in this by instituting innovate ways to ensure that our economy grows stronger.
From policies on trade, tax reform, and regulatory streamlining, the country is seeing the impact.
Under the President’s leadership, our country has seen historic economic growth:
There have been 6.7 million new jobs, including almost 500,000 manufacturing jobs, created since the President took office.
The unemployment rates for Hispanic Americans and African Americans are also near historic lows.
We’re seeing the stock market in historic territory.
And, just last week, President Trump signing into law the brand-new U.S.-Mexico-Canada Agreement.
The USMCA is the largest, fairest, most balanced, and modern trade agreement ever achieved. It’s a big victory for our farmers, ranchers, energy workers, factory workers, and American workers in all 50 states.
Critically, the USMCA is estimated to add another 1.2 percent to our GDP and create countless new American jobs.
This is all great news, and we know a strong economy is critical to helping distressed communities get back on their feet.
However, we must also recognize that even though our nation is experiencing the most significant economic expansion we’ve seen in decades, there are still communities that are struggling, and we are committed to continuing to help these communities transform.
That’s where Opportunity Zones come in.
I want to emphasize: The Opportunity Zones initiative is an investment vehicle, a tax incentive. It is NOT a government program!
This is an important distinction.
Opportunity Zones provide an innovative vehicle for helping drive transformative private investment to distressed areas!
As we move through 2020, there is a lot to be excited about in the world of Opportunity Zones.
Shortly before the holiday season got underway, we received word that the Treasury Department and IRS had issued final regulations implementing the Opportunity Zones tax incentive.
The final rules provide clarity for Qualified Opportunity Funds and their eligible subsidiaries in determining qualification and levels of new investment in Opportunity Zones.
They also provide guidance regarding the types of gains that qualify for Opportunity Zone investments, as well as gains that may be excluded from tax after a 10-year holding period.
The implementation of the final rules, combined with the now more than 200 Opportunity Zones focused policy actions that federal agencies have implemented since the Tax Cuts and Jobs Act was signed into law two years ago, paves the way for significant Opportunity Zone investment to continue to be made this year and moving forward.
So, where does the agency I represent, the U.S. Department of Commerce’s Economic Development Administration, or EDA, fit into the picture?
As the only federal government agency focused exclusively on economic development, EDA makes investments in economically distressed communities to create jobs, promote innovation, and accelerate long-term growth.
Our mission, therefore, fits hand in glove with the goal of the Opportunity Zones initiative, which is also focused on driving transformative private investment into distressed communities.
The fact is, and as I’ve mentioned, even though our nation is experiencing the most significant economic expansion we’ve seen in decades thanks to the policies that President Trump has initiated, there are still communities that are being left behind.
These communities may be impacted by the loss of a major employer, they may be suffering from the downturn of an entire economic sector as we see in coal country, or they may have been impacted by natural disasters like hurricanes, tornadoes, floods, or wildfires.
To help communities respond to economic plight, EDA’s budget has historically averaged about $320 million a year.
With these taxpayer funds, EDA makes investments to catalyze locally driven planning, technical assistance, and infrastructure strategies designed to spur economic development.
I’d like to emphasize that EDA does not go into communities preaching a Washington-knows-best sermon.
Rather, we support impactful, well-thought out, locally devised strategies designed to make it easier for businesses to start and grow.
Now, while our budget has average $320 million or so annually, in Fiscal Years 2018 and 2019, EDA received a total of $1.2 billion in supplemental disaster appropriations from Congress to help regions recover from economic harm and distress resulting from natural disasters occurring in 2017 through 2019.
With these funds, communities and regions hit hard by major disasters in the United States are rebuilding stronger, more resilient economies and EDA is pleased to help them achieve their goals through the supplemental appropriations.
In total, I am proud to report that since January 2018, EDA has invested nearly $352 million in 264 projects in or near Opportunity Zones across the United States. Many of these grants have been awarded to Opportunity Zones that have also been stricken by natural disasters.
Here in Utah, since January 2017, EDA has invested nearly $6.5 million in 29 projects, including more than $800,000 in 2 projects supporting designated opportunity zones.
This EDA assistances has helped communities and regions build the capacity for economic development.
The two Opportunity-Zone related investments that EDA has made in Utah are:
- A $719,000 EDA investment in Weber State University that is helping provide critical resources for early-stage entrepreneurs as they move through the startup life cycle. And,
- A $100,000 EDA investment in the Southeastern Utah Economic Development District that is helping them partner with the University of Utah-Eastern and Utah’s Business Expansion and Retention program to boost rural workforce training and retraining efforts.
Making investments in Opportunity Zones is one of the major roles we have been playing in the initiative.
Why is this important?
We have seen that Opportunity Zone investors magnify the amount of private investment that can be directed to these distressed areas, and have the potential to increase EDA’s ROI, which has been $15 for every $1 we’ve invested, by 5-fold, 10-fold, 25-fold, even 1,000 times, and more. This is significant!
To help further spur investment in Opportunity Zones, EDA is proud of the significant policy actions we have implemented to help our stakeholders take advantage of the Opportunity Zones initiative.
For example, in July 2018, EDA issued a Notice of Funding Opportunity - or NOFO - that made Opportunity Zones eligible for funding from EDA through our special needs category.
While the vast majority of Opportunity Zones qualify under EDA’s distress criteria, this designation captured and made eligible the remaining zones.
In addition, in June 2019, EDA added Opportunity Zones as an Investment Priority, which has increased the number of catalytic Opportunity Zone-related projects that we can fund.
These two policy changes mean that regardless of EDA’s economic distress criteria, if a grantee applies for funds for a project in one of the nation’s more than 8,700 Opportunity Zones, including Utah’s 46, EDA will automatically consider the application.
This does not mean the application will get approved. However, the project will receive full consideration.
In addition, to helping communities across America maximize their ability to attract investment to Opportunity Zones, recently EDA published an update to our Comprehensive Economic Development Strategies (CEDS) Content Guidelines.
And, to help local economic and community developers and investors target private investment to Opportunity Zones we, in partnership with Indiana University’s Kelley School of Business, launched the USA Opportunity Zones tool.
This new web-based tool provides critical demographic and business data that many of you seek.
I encourage you to visit: StatsAmerica.org/opportunity to explore this new tool, and the many other tools that EDA has funded, to help you develop a better understanding of the economic and demographic make-up of our nations’ opportunity zones and the communities in them.
EDA has also been working closely with the White House Opportunity and Revitalization Council to highlight our role in the initiative at Opportunity Zone events like this and at other conferences and gatherings that bring together local elected officials, business leaders, community groups.
It has been a fantastic and rewarding experience and I look forward to continuing this engagement throughout 2020.
In addition to this outreach, EDA’s Director of External Affairs and Communications, Joel Frushone, and EDA’s Special Advisor Clay Tufts, who are here with us today, and who will participate on the Winter Innovation Summit’s ‘Rural Opportunity Zones Playbook’ panel, has been leading an EDA Opportunity Zone state engagement effort.
Through this work, we are learning all we can about how states are supporting Opportunity Zones, where the best practices are, where the challenges are, and to explain EDA’s role and the assets we have.
We have seen state and local governments that are offering their own Opportunity Zones tax incentive packages. We are also making communities and investors aware of other incentives to stack on top of the federal tax incentive.
Critically, today, governors, mayors, and other community leaders are including Opportunity Zones in their economic development strategies and we encourage them to offer their own Opportunity Zone tax incentive packages to compliment the federal Opportunity Zone tax incentives.
To conclude, the Trump Administration believes, and so do I, that the sky is the limit when it comes to how the Opportunity Zones initiative can benefit investors and transform distressed communities. That is why we are here with you and committed to helping make the initiative a success.
At EDA, we are seeing real impact start to emerge, and we look forward to working with all of you to maximize the benefits of this important and historic initiative.
I thank you again for your interest and participation. It is because of you that this initiative is so successful.