Nearly two years since becoming law as part of 2017’s Tax Cuts and Jobs Act, the Opportunity Zones program could become an economic boon the United States needs in the face of a possible recession. But if the program becomes immersed in politics — like other reforms have — it may fail to help an ailing economy.
Recent history shows how close ties to one party (or one leader) can increase opposition around major legislation. Just as 2017’s tax reform is closely tied to President Trump, the Affordable Care Act of 2010 will forever be connected to President Obama and fighting “Obamacare” has united Republicans for years.
Similarly, because the Opportunity Zone program became law under the current Republican administration, it’s not hard to imagine Democrats decrying it for years to come — even though similar financial incentives to help distressed areas has been advanced by both Republican and Democratic administrations alike for over a half-century.
Look Past Ideology, Examine Numbers
It’s important that everyone involved makes sure that when evaluations are made, we look at objective numbers and put aside ideology and politics.
Organizations and partnerships are forming to define what metrics should define social impacts, including Columbia’s School of International and Public Affairs, which is bringing together experts with an emphasis on rigorous measurement and identifying the metrics that matter.
There is also the Opportunity Zones Reporting Framework, a voluntary guideline designed to define best practices for investors and fund managers looking to invest in Opportunity Zones. It includes a set of first principles and a detailed impact measurement framework. It’s led by the U.S. Impact Investing Alliance, the Beeck Center for Social Impact + Innovation at Georgetown University and the Community Development Finance Initiative of the Federal Reserve Bank of New York.
And the Mastercard Center for Inclusive Growth and Accelerator for America is leading a non-profit consortium of mayors, labor and business leaders, and urban and economic development experts. Using Mastercard transaction data, the partnership will provide community leaders with data-driven insights about economic activity in their Opportunity Zones, analysis of unmet needs for investment and ways to measure progress and results over time.
But data reporting initiatives shouldn’t merely identify metrics that are important. They must demonstrate how to collect data effectively and explain how to effectively analyze it. Otherwise the collection of data becomes too big of a burden.
Why These Efforts Matter
It’s encouraging that these groups are forming to provide guidance and best practices about a complex subject. In fact, Opportunity Zone funds fall within an area of fund administration called Specialty Financial Administration, which often requires digital-native firms to perform analysis that is beyond traditional administrators.
Digital-native firms — with software platforms built around code that allows financial administrators to handle small funds, funds with complex investors and challenging regulatory environments — make it possible not just to identify crucial metrics but to track them in ways that crucially can lead to consensus. Armed with the right information, fund managers and investors can coalesce around best practices. A seat at this data table can be given to local, regional and federal governments and all relevant stakeholders.
And that level of clarity is important in our highly politicized era. Far from being an in-the-weeds technical trick, these platforms provide the measurements that can show the true worth and potential of Opportunity Zones — and help us ensure that facts, and not politics, guide the way forward.
Reid Thomas is Executive Vice President and General Manager of NES Financial’s specialty financial administration business, focusing on technology-enabled EB-5, 1031 and Opportunity Zone fund administration.
Morning Consult welcomes op-ed submissions on policy, politics and business strategy in our coverage areas. Updated submission guidelines can be found here.