A new government incentive to encourage private investment where it is most needed presents tremendous potential in Rhode Island.
The incentive comes in the form of federal tax benefits for investors who direct capital gains into equity investments in qualified opportunity funds. The benefits increase if the investment is maintained over five to 10 years.
The investments target communities with low incomes that are part of opportunity zones designated by each state.
Rhode Island’s 25 zones are home to 111,000 people, representing diverse geographies, populations and potential economic drivers.
Numerous zones are in old mill villages that have not yet recovered from the industrial downturn of the mid-to-late 20th century. Others are in coastal communities, where invisible pockets of poverty persist. For example, 19 of Rhode Island’s opportunity zones have been designated by the U.S. Department of Agriculture as low access to grocery stores, 16 are high housing-needs tracts, 17 surpass the regional average for people with disabilities and 14 are above the average for households without a vehicle.
Targeted, focused capital could make an immediate, tangible difference for those communities and the state as a whole.
As the state’s community foundation, we have a century of experience providing the vital link between the needs of Rhode Island communities and savvy, generous philanthropists. So, as many in our state move forward to capitalize on the promise of opportunity zones, we offer two suggestions:
First, let’s be sure that this incentive doesn’t encourage activity that leaves out people who live in the zones, displaces residents or gentrifies neighborhoods. If this program lives up to its potential, it will provide the long-term, patient capital that real community development needs. If it goes wrong, it hurts the communities it was intended to help.
Second, doing this well will require local leadership and deep engagement of residents. This is designed to create a market. Left to its own devices, it won’t direct capital to the places most in need and the projects that respond to those needs.
Already across the country, we are seeing first movers take advantage of the incentive. Rhode Island must be ready if we want to see the kinds of investment that our communities truly need.
Jessica David is executive vice president of strategy and community investments at the Rhode Island Foundation.