BACKGROUND PRESS CALL
BY SENIOR ADMINISTRATION OFFICIALS
ON THE IMPACT OF OPPORTUNITY ZONES
Via Teleconference
8:38 A.M. EDT
MR. FIELDS: Thank you, Operator, and good morning, everyone. Thank you for joining today’s briefing -- background briefing call on the CEA report release on Opportunity Zones. This release will be out at 9:00 a.m. on the CEA website.
Today we have [senior administration official], as well as [senior administration official].
Both the opening remarks and the questions to follow will be on background to a senior administration official, and all information is embargoed until the conclusion of the call.
And with that, I’m happy to introduce [senior administration official].
SENIOR ADMINISTRATION OFFICIAL: Thanks very much. Well, we’re -- thank you also to everyone for joining the call today. We’re really excited about the release of this report, in which we provide a preliminary evaluation of the Opportunity Zone program, which was a provision of the 2017 Tax Cuts and Jobs Act that allowed state executives to designate up to 25 percent of their low-income census tracts and some tracts contiguous with the low-income census tracts as qualified Opportunity Zones.
So these were census tracts that met one of the following criteria: a poverty rate of at least 20 percent; that the tract is in not in a metropolitan area; a median family income does not exceed 80 percent of statewide median family income; the tract is in a metropolitan area and median family income is less than or equal to 80 percent of the greater metropolitan area or statewide family income; or that the tract has a population of less than 2,000 people and it’s within an empowerment zone and it’s contiguous to one or more low-income community.
And so these designated tracts, selected by governors to be eligible for investment tax credits, are among the poorest communities in the United States; they have an average poverty rate that is more than double that of other communities; and are home to a higher share of African Americans, Hispanics, and high school dropouts. And even among all the communities that were eligible to be in an Opportunity Zone under federal law, every state selected communities that, on average, had a lower median household income than did eligible communities that were not selected.
And so when we were looking at some of the preliminary effects of Opportunity Zone designation, we have observed a large investment response. So we actually estimate that qualified opportunity funds raised $75 billion in private capital by the end of 2019, and most of these funds would not have entered Opportunity Zones without this incentive, which constitutes over a fifth of total annual investment in Opportunity Zones.
And consistent with this, we also find that private equity investment in Opportunity Zone businesses grew 29 percent relative to eligible communities that were not selected as Opportunity Zones and conduct the thought of -- as a control group.
And I think you have the report in front of you, so I won’t get too much into the numbers, but just to provide some background and some of the reasons why we would expect to observe some positive effects of this designation: One, the cost of doing business in economically distressed areas is often higher for several reasons, including, but not limited to less access to skilled labor and transportation, as well as potentially higher crime. There’s also the potential for spatial mismatch because people can become trapped in low-income areas for several reasons, such as the inability to incur the cost of moving to and living in a more productive area.
And, in theory, place-based incentives, like the Opportunity Zones, can draw investment that will generate employment opportunities for otherwise immobile residents.
And finally, you know, these place-based incentive programs can attract highly skilled people to productive urban centers where they can innovate, learn from other highly skilled people, and these agglomeration economies can generate benefits that spill over into other areas of the economy.
And, certainly, thus far, you know, ours is not the only study of Opportunity Zones. Just last month, there was a new study out by Arefeva, Davis, Ghent, and Park that found that Opportunity Zone designation increased employment growth relative to comparable tracts by statistically significant 2 to 4 percentage points over the 2017 to 2019 period. And this result holds for many different industries and for a variety of skill levels.
So, thus far, the evidence on the Opportunity Zones program is encouraging. And, you know, we’re going to be looking at the data very closely moving forward as well.
MR. FIELDS: Great. Thank you. And [a senior administration official] is here now.
SENIOR ADMINISTRATION OFFICIAL: Well, thank you, everyone for being on the call, and thank you, [senior administration official] to you and your team there at CEA for the tremendous work and effort that has been put into creating this report. I’m very encouraged by the report and the findings of the report.
And for everyone’s knowledge, CEA is the leader, the pillar on the White House Opportunity and Revitalization Council that deals with data and analysis and measurement. And so thank you to CEA.
I have had the privilege of stewarding this council over the last year and a half, and we have been all around the country, to cities, communities -- urban, tribal, rural -- and have seen poverty in ways that I had not seen before.
But one thing that is so encouraging that, as we have traveled around the country and convened stakeholders together -- from elected officials, community leaders, faith leaders, education leaders, business leaders -- all coming together at the same table at one time to talk about the distress inside of the communities, as my colleague was explaining, and, you know, why is the pain of the community? What is it causing? Why is it so distressed? And then having those conversations of what can we do to strategize together to revitalize and to lift up these communities, whereby creating opportunities for new business owners, for new housing, for retail, for manufacturing.
And I would encourage all of you to go to our website, OpportunityZones.gov, and look at the Best Practices report, which is a great marriage to the forthcoming CEA report of, really, the grassroots efforts that have been put forth from local entities, from nonprofits, from private investors, from the faith community and the business community coming together all around the country -- very innovative in the ingenuity of the American people and the creativity to take a distressed community that has not seen investment in decades and to strategize and come up with the prospectuses and plans to revitalize that community.
And in the Best Practices report, you will see some of these examples.
And, you know, for myself, personally, to see groups coming together across socioeconomic background, across political backgrounds, education backgrounds -- to come together with viable solutions to lift up these communities across our country has been very humbling.
And you will in a CEA report, obviously, the statistics and the data; and in the Best Practices report, some of the real-life examples, like new grocery stores coming online in West Dallas, in the area that was a food desert and now employs over 100 new people in a healthy food store that’s open seven days a week.
Coatesville, Pennsylvania -- you know, the repurposing of an iconic, historic building there to do manufacturing and expansion in downtown Coatesville. Wilmington, Delaware, where there’s a vertical farm for -- it’s called Second Chances -- where our citizens that are reentering society from the incarceration are now resident entrepreneurs and learning about harvesting and vertical farming. And also, in Cleveland, Ohio, a new bakery coming online there, a first-time business owner, and 95 units of workforce housing.
And I say all these things just as a few examples of the investments that have been made in places where investment has not been seen in decades. And there’s many more examples of this.
But as I close, I just wanted to thank CEA, thank all of our media personalities for helping to amplify this message and get the message to the American people as an encouragement that people are coming together, both private and public, nonprofit, faith-based, education -- all across the board -- to lift up these communities of the forgotten people and forgotten communities in our country.
And so it’s good news on the horizon. And so thank you for allowing us to share with you this morning.
MR. FIELDS: Thank you. Operator, we’ll now open the line for some questions.
Q Hi. Good morning. Thanks for doing the call. I was wondering if you had any data that’s on this that’s not anecdotal. It seems like you’re listing a number of examples of Opportunity Zone investments that are individual businesses. But an Urban Institute study from earlier this summer said that most of the capital flowing into Opportunity Zone investments is nothing but real estate investments, not into businesses that are actually creating jobs. Do you have any hard data that would refute that?
SENIOR ADMINISTRATION OFFICIAL: I can take this, and then, if you want, you can follow up. And thank you, sir, for your question.
We do have many examples of operating businesses that are being started inside of Opportunity Zones. Yes, there has been real estate investment. There’s been retail investment. But there’s also been a great deal of operating businesses, in particular after the final round of rules and regulations were finalized last December.
For instance, in rural Tennessee, there is a manufacturing company that’s moving into a city in Tennessee that only has a population of 1,391 people, but a business is being built there as a tile manufacturer that will create over 200 jobs for this rural area in Tennessee.
I mentioned the new bakery in Cleveland, Ohio, in the Tremont area, that will also be a job creator there in northeast Cleveland that has not seen a new business in its area in many years.
In Coatesville, Pennsylvania, and Erie, Pennsylvania, not only is there retail and real estate development going on, but there’s also operating businesses that are in conjunction with these retail developments that are happening.
And every time this happens, there’s new jobs, both temporary, construction-type jobs, as well as full-time employment that is taking place. And so we’re hitting both phases of the employment.
There’s been hundreds of thousands of jobs, which has been a tremendous priority for the administration. Hundreds of thousands of jobs that have been created due to the investment inside of Opportunity Zones. And if you can get a picture in your mind, you’re talking about dilapidated, decayed, blighted areas that have not seen any investment.
And now, with the investment of Opportunity Zones, both public and private, new jobs coming on the horizon, new businesses -- in St. Louis, Missouri, at a particular development there -- I believe it’s on the west side, I believe at the Foundry -- and, you know, there’s 12 new culinary businesses, 12 new entrepreneurs that are coming online as a part of this investment and project as a whole.
And so, again, you can go on the Best Practices report and couple that with the CEA report to see those operating businesses that I’m speaking of and more.
SENIOR ADMINISTRATION OFFICIAL: Yes, thanks very much. I would only add to that that, you know, when we’re looking at employment growth in Opportunity Zone tracts -- and this is, you know, independent analysis by Arefeva, Davis, Ghent, and Park.
You know, across all of these 8,800 designated Opportunity Zones, they’re finding employment growth of 2 to 4 percent. That’s a pretty big -- that’s a pretty big observation in just the first two years of the program.
And interestingly enough, some other analysis by Sage, Langden, and Van de Minne find significant positive price increases for redevelopment properties and vacant sites, which potentially points to the development potential in these zones. And the paper by Arefeva et al. finds that construction industries experience the most significant job growth, which might have increased the current and expected future supply of both residential and commercial real estate.
And interestingly enough, the Arefeva et al. paper additionally finds not only employment growth but also establishment growth, on average, across Opportunity Zones, which suggests not only are existing firms hiring more but also that more firms are setting up new establishments.
Q Yes, hi. Good morning. Thank you everyone. Appreciate this conversation. I had a couple of questions. First, I was wondering if there is -- we actually don’t have the report in front of us, so, unfortunately, I couldn’t review it to this question.
But I'm wondering: Are you seeing any sort of partisan divide or any sort of partisan patterns, in terms of which cities or states are more likely to accept or use Opportunity Zones as investment tools? Are you seeing that these are more prevalent within Republican-led areas or Democratic-led areas, or are there no -- there's no correlation?
And then my second question is -- again, I haven’t seen the report, so I don't know the timeframe of when your cutoff period is for observation. But I'm wondering, even if the report itself doesn’t look at it, if you can tell me anecdotally, or if you have data of the effects of, first, the coronavirus: What are you seeing in terms of the coronavirus effects on these Opportunity Zones areas, if any? I would imagine there would be some. And then also, any effects on these communities because of the rioting and the destruction and the looting that we've seen in the street.
SENIOR ADMINISTRATION OFFICIAL: Well, thank you, ma’am. This is [senior administration official]. Really appreciate your question.
As far as, you know, what areas are prevalent for investment from Opportunity Zones, I have personally traveled with the council to over 60 -- almost 65 cities across our country, and so you can imagine that we have been involved with both sides of the aisle -- both Democratic-led cities and Republican-led cities.
And, you know, when you talk about poverty, poverty doesn’t have a party. And poverty affects all of us, either directly or indirectly. And when you come with a message of job creation, revitalization, transformation, and the reduction of poverty, what I have seen is that those leaders of those areas -- be it congressmen, senators, mayors, economic development leaders -- when you come in with a message such as that, it transcends politics -- because the people inside of these communities are hurting, but yet have tremendous skills but not have -- they don’t have a port of entry.
And so we have worked -- I personally have worked with both sides of the aisle in cities across America -- both Democrat and Republican; liberal and conservative. Because when you sit down at the table -- which I have many, many times with these stakeholders -- the message is not, you know, “What party are you from?” The message is: “What can we do lift this city up, to create a healthy food store, to create new jobs, to create better housing, to expand, you know, educational opportunity, manufacturing?”
I was in Michigan a few months ago, before the coronavirus hit, and there were two cities that came together there in Michigan. Both mayors, both economic development leaders, two different cities, two different visions, but one common goal, and that was to revitalize the areas that are hurting in their cities. And we had a tremendous time together. And I’ve many examples of that.
Prior to COVID, there was tremendous momentum inside of Opportunity Zones, as far investment, as far as strategy, as far as business prospectuses, dirt that was moving, creating new businesses. And when COVID hit, the thing that slowed down, obviously, was the travel.
But the spirit of the mission remains the same; the efforts remain the same. And, you know, we just went from going on the road, meeting in person, to now doing it on a Zoom call or on a conference call. But the strategies and the efforts remain the same.
And I believe because of that coming out of COVID, that the recovery will even be stronger. And I've began to travel just a little bit more now, so I've been to a couple of places to look at Opportunity Zones, to do award ceremonies, and look at projects.
And so, Opportunity Zones are still thriving and are still moving full steam ahead. But the travel during COVID was the only thing that was slowed down.
SENIOR ADMINISTRATION OFFICIAL: And I would just echo [senior administration official]’s excellent points by pointing everyone to, when you do get the reports, figure 1 in the CEA report on the geography of Opportunity Zones showing designated Opportunity Zone tracts in every state in rural and urban areas.
And then, if you look at figure 2, the demographics of Opportunity Zones over -- the number of people living in poverty in designated Opportunity Zones, prior to designation, was double the national average. The number of African Americans -- the African American percentage of the population in Opportunity Zones over 10 -- over double the national average. And similarly, the overrepresentation of Hispanics and folks without a high school diploma in Opportunity Zones.
So, I mean, these were really hard-hit areas and really struggling areas. And I think this is why, you know, we're really encouraged by the data that we've seen thus far about investment flowing into these tracts.
MR. FIELDS: And the report will be live in less than 20 seconds, so everyone will be able to see it on the CEA website.
And we'll take one more question.
Q Yes. My question is: There’s an article that was in the USA Today about the parks and how they -- if you juxtapose them with the parks in the white neighborhoods, they were better, they were more staffed, and there was less wait in line. Have you guys noticed the difference with the parks in these areas, in these critical Opportunity Zones?
And my next question is: It seems like this is more (inaudible). I guess your analysis is more financial, but how is it helping the overall health of these people? And in these Opportunity Zones, have you been encouraging these types of people to get -- to get into clinical trials with the vaccine against the coronavirus, since we all know that these kind of neighborhoods are disproportionately affected by the coronavirus?
SENIOR ADMINISTRATION OFFICIAL: Thank you, sir. This is [senior administration official], and I'm going to address the second part of your question.
The spirit of the law of the Opportunity Zone initiative is both economic development and community development, so economic impact and social impact. And I say that because, as you have economic development inside of a neighborhood, when new jobs come online, it does a great deal to lift the hope and the aspirations of the community, and that impacts it socially. Because as I stated before, a lot of people inside of Opportunity Zones have great skill sets, but yet they haven’t had port of entries to realize those skill sets.
In Miami, I was there with Secretary Ben Carson earlier last year and we were in an Opportunity Zone where there has been a rehabilitation of a housing project there. And two young men that grew up in this neighborhood, in Liberty City, were hired by the developer there. They were taught how to do certain construction jobs; in particular, how to install doors and windows.
And the testimony of these two young men was: “I had been involved in destructive behavior before. I grew up in the neighborhood, but now I have a life skill set.” And he pointed to this window. He said, "I put this window in this apartment." And he was proud of that because now he has an honorable job. Well, that affected not only him but his family and also those people in the neighborhood that saw him doing an honorable job.
And so now there were inquiries from people in the neighborhood: "How can I also get a job doing the same thing?" And so you have economic development, as well as social impact. And so people are encouraged when they see new movement, because I’ve heard people say, "Well, we didn’t think anything good would ever happen in our community. But Opportunity Zones, the initiative, has given us a doorway if you will, and a venue, a vehicle to bring about economic development to bring hope and inspiration to places that have not seen it in a long time.”
And sometimes, I know data will not measure impact from a social standpoint, but I can tell you, as an ambassador and a leader of this council, I have seen it with my own eyes: people’s lives changing, transformed because of new opportunity.
And so I say that to you because that’s one of the things that when you see people's lives transformed, their children's lives are going to be transformed, their conversations at the kitchen tables will change -- because now, as we have an opportunity to do well for ourselves and to do better for our community.
And so that's part of the message that I really hope that we can amplify and get out, because people's lives, every day, are being changed because there's good news of this council, this policy, and the initiative.
MR. FIELDS: [Senior administration official] do you have anything to add to that?
SENIOR ADMINISTRATION OFFICIAL: I think my colleague covered it.
MR. FIELDS: I agree. I agree.
And with that, I want to thank everyone for joining today's call. Again, both the opening remarks and the question-and-answer portion are on background to a senior administration official. And as always, direct all further questions to the White House Press Office.
Thank you, everyone, and enjoy your day.
END 9:04 A.M. EDT
|
No comments:
Post a Comment