Rural America has opportunity zones too

Opportunity zones are quickly becoming the new buzzword on how to drive private investment into some of the nation’s most distressed communities. But one word is missing from many of these discussions: rural. Time is quickly running out on the chance to extend this valuable program to this broad geography.

Opportunity zones are a new national community investment program designed to drive private-sector investments in low-income communities across America. The opportunity zones program provides a tax incentive for investors to re-invest their realized capital gains into opportunity zone funds that are dedicated to investing into distressed communities.

{mosads}Opportunity zones are designated by the governor of every U.S. state and territory, but this does not ensure that any funding goes into rural communities, some of the most economically distressed areas in the United States.

Each governor is given the authority to select up to 25 percent of the total number of low-income census tracts in a state as opportunity zones, but many of those decisions were made by the deadline of March 21.

States that requested 30-day extensions still have the opportunity to ensure that rural communities are represented, but many of the initial conversations around these zones have been focused on urban communities.

Since the recession, both investments and economic recovery have come more quickly to urban and non-rural geographies than rural communities. Opportunity zones are a chance to provide patient capital that can be invested in infrastructure, businesses or other investment vehicles in rural communities across the country.

Why is this so important to rural communities?

• In order to drive economic growth and opportunity, it is imperative to spur growth of small businesses and innovation.
• New businesses are the greatest source of job growth across the country, especially in rural communities.
• Rural residents create self-employment opportunities at a slightly higher rate than the national average, and the type of businesses started in rural communities are more resilient on average than in larger communities.
• The single largest issue for small businesses in rural communities is access to capital, in many ways because most of the capital focused on small business investment is focused on the coasts.

Business capital is not the only type of investment that opportunity zones can invest in and may not be the most important piece of this puzzle for rural communities.

There is an historic lack of infrastructure investment happening across rural communities, leading to large and expensive repairs and a lack of access to things like safe drinking water and broadband.

What is the cost of not investing in infrastructure now?

• Upgrading deteriorating water systems alone is projected to cost more than $1 trillion over the next 20 years, at a time when federal investment is at its lowest in history.
• Federal funding of water infrastructure was 63 percent of total capital spending in 1977 and was down all the way to 9 percent in 2014. This underinvestment hits rural communities especially hard, leading to rural residents paying three-times more than their urban counterparts for water and wastewater services.
• 23 million Americans in rural communities do not have access to broadband, a startling number that limits job creation and workforce development programs, not to mention issues like telehealth that are becoming more difficult every day.

Also, investments in infrastructure are job creators in rural communities. It has been estimated that for every $1 million invested in water, 16 jobs are created. In a rural community, those numbers speak loudly. Sound infrastructure investments lay the groundwork for economic growth, and opportunity zones are one of many ways to drive more investment into the communities that need it the most.

As opportunity funds are created, it is important for them to look at opportunities to invest in rural communities where their investments will make a big impact on an area that badly needs the infusion of capital.

As governors start to select which zones will be eligible, there is a huge need to identify rural communities as candidates for the opportunity zone designations. States risk missing a major development opportunity if they skip over these regions as they make their initial selections.

Matt McKenna is the founder of the Rural Opportunity Initiative, a program of the Global Social Enterprise Initiative at Georgetown University’s McDonough School of Business.