Take Your Shovel and Shove It Somewhere Else!
Qualified Opportunity Zones are not a garbage can for developers who cannot fund projects elsewhere. Qualified Opportunity Fund managers must beware of the 10-year tail!
“Shove It.” If you are a Qualified Opportunity Fund, your inbox is filled with Developers with “Shovel Ready Projects.” Some of these are great offers, but many are just developments that could not get funded without a tax incentive — meaning they were “garbage can ready projects” before QOZ.
“Take Care Of My Dog.” As a Qualified Opportunity Zone manager, you are required to manage that property for the next 10 years. Meaning that developer will walk away with a hand full of your investor’s cash, while you babysit their “turnkey” project for the next decade.
“Falling Objects Cut.” To combat your inbox against falling objects, which are developers who think QOZ is a way of offloading projects that could not get funded otherwise, require the developers to bring a funding source for that project. This means that outside of QOZ that development had some value, and it’s not just another dog needing a tax incentivized tail.
“It’s the Community’s Baby Stupid.” Stay aware of the spirit in which QOZ laws were written, to bring economic progress to low-income communities over a period of time. So QOZ managers are supposed to have their eyes on projects which offer consistent job creation, education, housing, and preferably entrepreneurship — since 6 in 10 jobs are created by small businesses.
“The Writing Is On The Wall.” So if you are managing or investing in a QOZ fund, know the community benefit spirit of regulations. After all, the authors of this legislation have threatened to yank the incentives if it does not benefit these economically challenged areas and ends up just being a tax haven for the wealthy. That announcement should have been a shot over the bow for QOZ funds launched by some wealth manager’s office as an extension of their services — who look to take advantage of the law by building cheap-hotel projects, a source of low-paying jobs with low elements of community benefit, a “Shovel in the QOZ Grave.”
“Impact is Profitable.” Bringing jobs to the community and launching solid projects which are sustainable returns not just a social benefit, but an economic one. Today’s consumers are holding companies accountable while at the same time benefiting those that are socially and environmentally responsible.
Jessica Contreras is the Co-Manager of WIF AX, LLC — Women’s Innovation Fund Accelerator, whose mission is to fund growth, equality, and sustainability within Qualified Opportunity Zones.
…..
