[Joint House and Senate Hearing, 115 Congress]
[From the U.S. Government Publishing Office]








                                                        S. Hrg. 115-297

                    THE PROMISE OF OPPORTUNITY ZONES

=======================================================================

                                HEARING

                               before the

                        JOINT ECONOMIC COMMITTEE
                     CONGRESS OF THE UNITED STATES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 17, 2018

                               __________

          Printed for the use of the Joint Economic Committee











[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
















                                   ______
		 
                     U.S. GOVERNMENT PUBLISHING OFFICE 
		 
30-384                    WASHINGTON : 2018                 















                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

HOUSE OF REPRESENTATIVES             SENATE
Erik Paulsen, Minnesota, Chairman    Mike Lee, Utah, Vice Chairman
David Schweikert, Arizona            Tom Cotton, Arkansas
Barbara Comstock, Virginia           Ben Sasse, Nebraska
Darin LaHood, Illinois               Rob Portman, Ohio
Francis Rooney, Florida              Ted Cruz, Texas
Karen Handel, Georgia                Bill Cassidy, M.D., Louisiana
Carolyn B. Maloney, New York         Martin Heinrich, New Mexico, 
John Delaney, Maryland                   Ranking
Alma S. Adams, Ph.D., North          Amy Klobuchar, Minnesota
    Carolina                         Gary C. Peters, Michigan
Donald S. Beyer, Jr., Virginia       Margaret Wood Hassan, New 
                                         Hampshire

                   Colin Brainard, Executive Director
             Kimberly S. Corbin, Democratic Staff Director
























                            C O N T E N T S

                              ----------                              

                     Opening Statements of Members

Hon. Erik Paulsen, Chairman, a U.S. Representative from Minnesota     1
Hon. Martin Heinrich, Ranking Member, a U.S. Senator from New 
  Mexico.........................................................     3

                               Witnesses

Hon. Tim Scott, a U.S. Senator from South Carolina...............     5
Mr. John W. Lettieri, Co-Founder and President, Economic 
  Innovation Group (EIG), Washington, DC.........................     7
Ms. Terri Ludwig, Chief Executive Officer, Enterprise Community 
  Partners, New York, NY.........................................     9
Mr. Maurice A. Jones, President & CEO, Local Initiatives Support 
  Corporation (LISC), New York, NY...............................    11

                       Submissions for the Record

Prepared statement of Hon. Erik Paulsen, Chairman, a U.S. 
  Representative from Minnesota..................................    32
Prepared statement of Hon. Cory A. Booker, a U.S. Senator from 
  New Jersey.....................................................    35
Prepared statement of Hon. Martin Heinrich, Ranking Member, a 
  U.S. Senator from New Mexico...................................    36
Prepared statement of Hon. Tim Scott, a U.S. Senator from South 
  Carolina.......................................................    37
Prepared statement of Mr. John W. Lettieri, Co-Founder and 
  President, Economic Innovation Group (EIG), Washington, DC.....    39
Prepared statement of Ms.Terri Ludwig, Chief Executive Officer, 
  Enterprise Community Partners, New York, NY....................    47
Prepared statement of Mr. Maurice A. Jones, President & CEO, 
  Local Initiatives Support Corporation (LISC), New York, NY.....    55
H.R. 828 submitted by Representative Maloney.....................    64
Response from Mr. Lettieri to Questions for the Record Submitted 
  by Senator Klobuchar...........................................    67
Response from Ms. Ludwig to Questions for the Record Submitted by 
  Senator Klobuchar..............................................    68
Response from Ms. Ludwig to Questions for the Record Submitted by 
  Senator Heinrich...............................................    69
Response from Mr. Jones to Questions for the Record Submitted by 
  Representative Maloney.........................................    72
Response from Mr. Jones to Questions for the Record Submitted by 
  Senator Klobuchar..............................................    73
Response from Mr. Jones to Questions for the Record Submitted by 
  Senator Heinrich...............................................    76

 
                    THE PROMISE OF OPPORTUNITY ZONES

                              ----------                              


                         THURSDAY, MAY 17, 2018

             Congress of the United States,
                          Joint Economic Committee,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:00 a.m., in Room 
216, Hart Senate Office Building, the Honorable Erik Paulsen, 
Chairman, presiding.
    Representatives present: Paulsen, Maloney, Handel, Adams, 
LaHood, Delaney, and Comstock.
    Senators present: Heinrich, Peters, Hassan, and Sasse.
    Staff present: Theodore Boll, Colin Brainard, Gerardo 
Bonilla, Daniel Bunn, Kim Corbin, Barry Dexter, Alaina 
Flannigan, Connie Foster, Natalie George, Colleen Healy, Matt 
Kaido, Allie Neill, and Alex Schibuola.

   OPENING STATEMENT OF HON. ERIK PAULSEN, CHAIRMAN, A U.S. 
                 REPRESENTATIVE FROM MINNESOTA

    Chairman Paulsen. We will call the hearing to order.
    Good morning, and welcome to today's hearing on The Promise 
of Opportunity Zones. America's new economy is finally taking 
off. The Congressional Budget Office, CBO, now projects 3.3 
percent growth for 2018, the highest annual growth rate since 
2005, up from a meager 1.9 percent it estimated prior to the 
Tax Cuts & Jobs Act and regulatory reforms. And while all 
Americans benefit from faster growth, we can, and should, take 
special care of those communities who are in greater need of 
support. Some communities, both urban and rural, are having a 
particularly difficult time.
    The new tax law contains a provision that deserves more 
public attention, one that is designed to help lower-income 
areas. The law provides a capital gains tax incentive to 
encourage long-term, private investment in communities that 
have had difficulty attracting jobs and new business. Unlike 
past targeted incentives, the areas are selected by governors, 
who know the unique needs of their communities, instead of by 
the Federal Government.
    Opportunity Zones have been a bipartisan, bicameral 
initiative. The House author of the original legislation, The 
Investing in Opportunity Act, is former representative Pat 
Tiberi who chaired this Committee until January of this year. 
We are honored to have the Senate author with us, as well 
today, Senator Tim Scott of South Carolina.
    Opportunity Zones hold the promise of flexible, innovative 
solutions. And flexibility is important, because the reasons 
some areas lag economically vary across communities and 
regions. A factory central to a town's economy may have closed, 
leaving workers and searching for new skills and jobs, that is 
if they haven't given up entirely.
    The area may have underperforming schools. They may lack 
access to capital. Excessive taxes and regulation may have made 
it difficult to start or maintain a business. The community may 
be struggling with rampant drug and alcohol abuse. This is why 
``one size fits all'' Federal spending programs or incentives 
to invest only in particular activities are not well-suited to 
address each community's unique set of challenges.
    This is why also Opportunity Zones, which allow the private 
sector and local communities to innovative and collaborate on 
the best solutions, have much greater potential for meeting 
those unique needs.
    John Lettieri, one of our distinguished witnesses today, 
put it well in a recent op-ed in The Hill. He noted that 
previous location-targeted programs had an ``overly 
prescriptive top-down approach that left no room for local 
experimentation.''
    Opportunity Zones, on the other hand, will bring ``the best 
possible mix of investments in new and expanding businesses, 
infrastructure and energy projects, commercial real estate, 
affordable housing and more.''
    Opportunity Zones also hold the promise of local knowledge 
and engagement. They are chosen by governors, who know their 
communities well, and not by Federal planners with a formula-
based spreadsheet.
    Across the country, there are about 8,700 Opportunity 
Zones. My own State of Minnesota is hoping to attract 
additional long-term, private investment into 128 census tracts 
that were recently selected as Opportunity Zones.
    State and local leaders can also help their communities in 
thriving by collaborating and removing unnecessary barriers to 
starting a business such as overly prescriptive occupational 
licensing or local zoning ordinances. Opportunity Zones also 
hold the promise of access to a large amount of untapped 
capital. Investors who reinvest capital gains from another 
investment into these zones temporarily defer taxes.
    And these investments are pooled in Opportunity Funds so 
that no single investor has to have specialized knowledge about 
how and where to invest since those decisions can be made by 
the experts who manage the funds.
    The longer investments are held in Opportunity Zones the 
more the capital gains relief grows, a strong incentive to 
invest in a community for the long-haul. And this also 
encourages fund managers to invest--in enterprises that will 
yield the most success and prosper for a community--prosperity.
    With an estimated $6 trillion in unrealized capital gains 
and no upfront State or Federal costs, the potential 
investments flowing into struggling communities is almost 
limitless. We have a highly knowledgeable panel of witnesses 
here today, who have been engaged in the Opportunity Zone 
initiative and whose observations and insights I very much look 
forward to hearing.
    Before I introduce the witnesses, though, I now recognize 
our Ranking Member Senator Heinrich for his opening statement.
    [The prepared statement of Chairman Paulsen appears in the 
Submissions for the Record on page 32.]

 OPENING STATEMENT OF HON. MARTIN HEINRICH, RANKING MEMBER, A 
                  U.S. SENATOR FROM NEW MEXICO

    Senator Heinrich. Good morning, Chairman Paulsen, and thank 
you for holding today's hearing. I want to recognize my 
colleagues Senator Booker and Senator Scott for their important 
work to create a new incentive to invest in communities with 
high poverty and persistent unemployment.
    Mr. Chairman, my good friend Senator Booker, could not be 
here this morning but provided a statement and asked that it be 
entered into the record.
    Chairman Paulsen. Without objection.
    [The prepared statement of Senator Booker appears in the 
Submissions for the Record on page 35.]
    Senator Heinrich. It is good to have my colleague from 
South Carolina here with us today, and we look forward to his 
testimony. And I want to thank you and Senator Booker for your 
leadership on this issue.
    Even today, more than ten years after the recession began, 
the recovery still has not reached many communities, both rural 
and urban. In New Mexico, our statewide unemployment rate is 
almost 50 percent higher than the national average. And in some 
areas, it's much higher.
    Across the country, there are more than 50 million 
Americans living in distressed communities. There's enormous 
talent in these communities, but we have underinvested in it.
    While the Chairman and I disagree on the underlying 
Republican tax bill, a partisan bill that continues to leave 
working Americans behind, we do agree that Opportunity Zones 
hold the promise to direct some much needed financial 
investment to places like New Mexico.
    Opportunity Zones are an important addition to the tool 
kit. They can support investments in affordable housing and 
small businesses while spurring job creation, and they can help 
lift living standards in neighborhoods across the country.
    The new Opportunity Funds have the potential to attract 
high-net-worth investors, who previously have not invested in 
low-income communities.
    Thanks to the long bull market, many investors are sitting 
on substantial unrealized capital gains that we can put to work 
generating housing, jobs, and growth.
    What distinguishes Opportunity Zones from other Federal 
efforts to stimulate growth in distressed communities, such as 
the New Markets Tax Credit, is flexibility. There are few 
investment constraints. Funds can invest as much as they want. 
There's no competition to receive the benefit.
    But with this flexibility, there is risk that the social 
impact will not be as great as we would like it to be. To 
achieve broad public benefits, projects should be part of a 
community strategy to create jobs, boost entrepreneurship, 
increase affordable housing, and promote economic development.
    Investors should also tap the vast expertise that exists in 
private, public, and non-profit sectors about how to make high-
impact community investments. And we were fortunate enough to 
have some of that expertise here with us today.
    I've seen first-hand the important work Enterprise and 
LISC, together with their partners, has done in New Mexico, 
providing affordable housing projects and creating jobs in 
Gallup and Las Cruces and Santo Domingo Pueblo, for that 
matter. And Opportunity Zones can help us do even more.
    Poverty is stubborn; one in five children grows up in 
poverty in this country, a number that hasn't moved much in a 
generation. In New Mexico, three in ten children grow up in 
poverty. And in some of our counties, close to half of all 
children live in poverty. Growing up poor has lasting impacts 
on a child's development, affecting successes in the classroom 
and educational and employment outcomes later in life.
    In addition to expanding proven credits and programs like 
the Earned Income Tax Credit and Head Start, we need new 
approaches. Two-generation models can increase opportunities 
for families living in poverty by simultaneously targeting 
children and parents with programs and supports to boost 
economic security and improve the health and well-being of the 
whole family.
    Opportunity Zones offer an additional path to spur economic 
development. Before the new zones are implemented, we have time 
to think through some guardrails that can help ensure that the 
intent of the legislation is fully realized; and closely 
monitoring implementing and establishing appropriate 
guardrails, either through rules or additional action by 
Congress, can go a long way towards ensuring that Opportunity 
Zones bring new economic activity to communities that 
desperately need it. This is a big opportunity. I'd like to see 
us seize it.
    Thank you to the witnesses for being here today, and I look 
forward to each of your testimonies.
    [The prepared statement of Senator Heinrich appears in the 
Submissions for the Record on page 36.]
    Chairman Paulsen. Well--and thank you Senator. And as we 
begin with our witnesses today, I want to, first, acknowledge 
the Honorable Tim Scott. Senator Scott is with us, who worked 
with your colleague, Senator Booker, whose testimony has been 
entered into the record also.
    Senator Scott is a South Carolina native and was sworn in 
as a United States Senator from South Carolina in January of 
2013 to complete the term of retiring Senator Jim DeMint. 
Senator Scott was elected to a full term in the U.S. Senate in 
January 2017. And prior to the U.S. Senate, he served in the 
U.S. House of Representatives, the South Carolina State House, 
and the Charleston County Council.
    Before he entered public service, Senator Scott built a 
successful small business of his own, and is a co-author with 
former Ohio Representative, Pat Tiberi, of the original 
Opportunity Zone legislation.
    We welcome your expertise and you being here today. I know 
you have to leave a little early, so we'll listen to you and 
introduce the rest of the witnesses after you conclude.
    With that, Senator Scott, you're recognized for five 
minutes.

  STATEMENT OF HON. TIM SCOTT, U.S. SENATOR FOR SOUTH CAROLINA

    Senator Scott. Thank you, Chairman and to the Ranking 
Member, as well. I appreciate you guys having this hearing.
    In large part, because of the tax cuts in jobs, our economy 
is booming. We're in the middle of the third largest economic 
expansion since 1854; yes, 1854, and by the time we're done, it 
will be the second longest economic expansion.
    Record revenues entered our Treasury in April. Unemployment 
rates are at 3.9 percent; a million folks have come back to the 
workforce; wages are up 2.9 percent over last year. African-
American unemployment is the lowest record in four decades, 
since they started taking notes in 1972; 800,000 new jobs have 
been created since the passage of this legislation.
    Because of tax reform, millions of Americans have seen 
increases in benefits wages or bonuses. According to a survey 
by the manufacturers, 72 percent of manufacturers plan to 
increase wages or benefits this year; 77 percent plan to hire 
more employees. Additionally, the NFIB says optimism for small 
businesses is at a 45-year high; poor sales at record lows.
    Many components of the Tax Reform Bill have yet to be 
implemented. And this is really good news, because as I speak, 
the Treasury Department is finalizing guidance for Opportunity 
Zones. And here's why that's so important.
    Fifty-two million Americans live in distressed communities. 
I have personally been raised in one of those distressed 
communities, and I will tell you that the potential in those 
Opportunity Zones is incredibly high. But too often, too little 
of these Opportunity Zones find themselves manifesting in these 
distressed communities.
    And the question that, I think, of the Investing in 
Opportunity Act answers is: How do we attract private sector 
capital back into distressed communities?
    The answer is, in part, by deferring the capital gains tax, 
if you will, make a long-term investment in those distressed 
communities. This is incredibly important, because the goal is 
not to make short-term investments where investors have an 
opportunity to have a great return. This goal, the goal of the 
legislation, is to make sure that those residents living in the 
Opportunity Zones, those businesses located in the Opportunity 
Zones, the property that could be rehabilitated in the 
Opportunity Zones, benefits from a long-term view of making a 
community better without the gentrification. And there are a 
number of models from Atlanta to Spartanburg, South Carolina, 
and North Charleston, South Carolina, where we can see that the 
approach become reality.
    It's also a win, win, win. Local mayors had major input in 
making sure that the governors' recommendation came from the 
experts closest to the people. And those of us serving in 
Congress, we all know that's it's amazing that our approval 
ratings are at 13 percent. That includes our family, our 
cousins, our brothers, our best friends from high school.
    But local officials have a much higher approval rating. The 
closer the government is to the people, the more the people 
trust that government. And when it comes to investing in 
opportunity and Opportunity Zones, having the mayors' input, 
with the governors' assistance, makes this a win-win on the 
local level and the State level. But what makes it a win on the 
Federal is that our hands are not there; that the red tape and 
the challenges that come with Federal Governmental oversight 
are not there. We can have great confidence in our cities, in 
our states, to do the right thing for all of our citizens. And 
by having a Federal program that simply encourages, in a sense, 
capital to take a second look at communities that they would 
not normally take a second look, this is really good news for 
residents.
    My hope is a simple one: That as we see the manifestation 
and the creation around the country of Opportunity Zones that 
we will be having another joint meeting in a year, in two 
years, so that we can measure the progress made in reasonable 
time and that we can celebrate in a bipartisan fashion of the 
Opportunity Zone while it was a part of the Republican package 
for tax cuts and jobs, it is not a partisan legislation. It is 
not even a bipartisan legislation. It was American legislation 
for American people stuck, sometimes trapped, in a place where 
it seems like the lights grow dimmer, and the future does too. 
Let's turn those lights on and make the future bright.
    [The prepared statement of Senator Scott appears in the 
Submissions for the Record on page 37.]
    Chairman Paulsen. I want to thank Senator Scott again for 
taking the time to appear before the Committee. And I know you 
may join us for a little bit, and I know you have to also run.
    I also want to, once again, acknowledge Senator Booker's 
testimony that has been entered into the record. And with that, 
we'll begin the introduction--introduce our witnesses.
    First, we have with us, Mr. Maurice--I apologize--we have 
Mr. Lettieri who is with us, John Lettieri, who is the Co-
Founder and President of the Economic Innovation Group.
    Mr. Lettieri leads EIG's policy development, economic 
research and legislative affairs efforts. He has worked in both 
the public and private sectors with policymakers, 
entrepreneurs, investors and global business leaders. Prior to 
EIG, Mr. Lettieri was the Vice-President of Public Policy and 
Government Affairs for the Organization for International 
Investment.
    Additionally, he served as a foreign policy aide to former 
U.S. Senator Chuck Hagel during his time as a senior member of 
the United States Senate Foreign Relations Committee. Mr. 
Lettieri is a graduate of Wake Forest University, where he 
studied political science and global commerce.
    Also is Ms. Terri Ludwig, who is the Chief Executive 
Officer of Enterprise Community Partners, Incorporated, which 
is a national, non-profit, that creates affordable homes and 
strengthens communities across the United States.
    From 2002 to 2009, Ms. Ludwig served as president and chief 
executive officer of the Merrill Lynch Community Development 
Co. Prior to Merrill Lynch, she was the president and CEO of 
ACCION New York, the largest non-profit, microlender in the 
United States.
    In 2011, Forbes Magazine named Ms. Ludwig to its first ever 
``Impact 30 List,'' a roster of 30 of the world's leading 
social entrepreneurs. Ms. Ludwig holds a Bachelor's Degree from 
the University of Illinois at Urbana-Champaign and a Master's 
Degree from Harvard University's John F. Kennedy School of 
Government.
    And Mr. Maurice Jones is President and CEO of the Local 
Initiatives Support Corporation, LISC, a non-profit that 
connects public and private resources with struggling 
communities.
    Immediately prior to joining LISC, he served as the 
Secretary of Commerce for the Commonwealth of Virginia. Mr. 
Jones also served as Deputy Secretary for the U.S. Department 
of Housing and Urban Department, HUD. Prior to that, he was 
Commissioner of Virginia's Department of Social Services and 
Deputy Chief of Staff to former Virginia Governor Mark Warner.
    Mr. Jones earned a Bachelor's Degree from Hampden-Sydney 
College, a Master's Degree in International Relations from 
Oxford University, and in 1992, he graduated from the 
University of Virginia Law School.
    We look forward to each of your testimony, each of your 
witnesses' testimony today. And with that, we'll begin with Mr. 
Lettieri. You're recognized for five minutes.

   STATEMENT OF MR. JOHN LETTIERI, CO-FOUNDER AND PRESIDENT, 
        ECONOMIC INNOVATION GROUP (EIG), WASHINGTON, DC

    Mr. Lettieri. Well, thank you.
    Chairman Paulsen, Ranking Member Heinrich, Members of the 
Committee, it's a pleasure to be with you today.
    I'm the Co-Founder and President of the Economic Innovation 
Group, a bipartisan research and advocacy organization. EIG 
worked closely with the lead sponsors to help develop and 
champion the bipartisan Investing in Opportunity Act, which 
served as the basis for the Opportunity Zones provision in the 
Tax Cuts and Jobs Act of 2017. Since it became law, we've 
worked closely with a wide array of stakeholders nationwide to 
support the effective implementation of this new policy.
    The Opportunity Zones initiative is the most ambitious 
Federal attempt to boost private investment in low-income areas 
in a generation, one with a potential to drive billions of 
dollars of new investment to these communities over the coming 
decade.
    The fundamental purpose of this incentive is to encourage 
long-term equity investment. And in pursuing this goal, 
Congress established a framework flexible enough to support a 
broad array of investments and encourage creative local 
implementation.
    I want to draw particular attention to two of its most 
important features. First, this is a highly flexible incentive, 
one that can be used to meet a wide range of needs in low-
income areas. This structural flexibility extends to 
Opportunity Funds, the intermediaries that will raise and 
deploy capital into the zones, which can be structured to 
engage a wide variety of investors.
    Second, this is a nationally scalable incentive. And by 
this--I mean--there is no fixed cap on the amount of investment 
that can be channeled into Opportunity Zones, nor is there a 
limit on the number of zones that can receive investments in 
any given year.
    This scalability derives from the fact that investors 
receive no up-front subsidy or allocation from the Federal 
Government. And these ingredients are essential, because they 
unlock the vast creativity and problem-solving potential of 
communities and the marketplace in ways that simply would not 
be possible under a more prescriptive framework. The unique 
structure of this incentive has the potential to unlock an 
entirely new category of investors and create an important new 
asset class of investments.
    Our analysis of Federal Reserve data found an estimated 
$6.1 trillion of unrealized capital gains held by U.S. 
households and corporations as of the end of 2017. So even a 
small fraction of these gains reinvested into Opportunity Zones 
would constitute the largest economic development initiative in 
the country.
    How were Opportunity Zones selected?
    Well, Congress assigned Governors the critical role of 
selecting Opportunity Zones--empowering states to develop 
selection criteria in ways that reflected their unique local 
characteristics, while working within a broad national 
framework.
    The result has been a vibrant nationwide effort involving 
thousands of State, local, and county officials, foundations 
and philanthropies, economic development groups, investors and 
entrepreneurs, and more.
    The core challenge for Governors was identifying 
communities that struck the right balance between need and 
opportunity, places where this incentive could have the 
greatest impact. And as of this hearing, EIG has been able to 
collect and analyze data from 42 states, representing roughly 
87 percent of the national total of designations, 27 million 
people reside in tracts selected thus far; 57 percent of whom 
are non-white, 23 percent of the tracts lie outside of a 
metropolitan area. And Governors have gone far beyond the 
statue in selecting for need. The designated tracts have an 
average poverty rate of nearly 31 percent, and a median family 
income equal to only 59 percent of the area median.
    While some are concerned that governors would simply target 
already rapidly improving areas, less than 4 percent of the 
selected census tracts have experienced high levels of 
socioeconomic change from 2000 to 2016, according to data from 
they Urban Institute. In contrast, 69 percent of the population 
resides in an area that Treasury's CDFI Fund considers severely 
distressed.
    So what should states do to make Opportunity Zones 
successful? While this is a Federal incentive, it's success in 
any given community will ultimately depend on State and local 
leadership. Every State needs a strategy to ensure strong 
coordination between the public, private, and philanthropic 
sectors.
    Governors and mayors should build on the incentive in a 
variety of ways, including by ensuring their own State tax 
codes conform to the Federal incentive. Wherever possible, they 
should align workforce development programs to support local 
residents, ease restrictive land use regulations, reduce 
onerous occupational licensing burdens, and provide practical 
support to connect investors with communities.
    For its part, Congress should move quickly to address 
technical corrections necessary to making Opportunity Zones 
work as intended, and the Administration should ensure every 
relevant agency is accountable to support the needs of 
Opportunity Zones in concrete and measurable ways.
    Ultimately, the core measure of success is whether 
Opportunity Zones establish a stronger connectivity between 
communities and the equity capital needed to seed new 
industries, revitalize local assets, and improve access to 
opportunity.
    I want to close with a note of cautious optimism. 
Implementation of Opportunity Zones is already bringing new 
energy, ideas, and much needed attention to one of this 
country's most vexing challenges. But while the scale of 
potential is enormous, it's important to underscore that 
Opportunity Zones are not guarantee zones. We must keep sight 
of the fact that reviving struggling communities is a long-
term, complex undertaking, and the work is just beginning.
    So I thank you for holding this hearing today, and I look 
forward to answering your questions.
    [The prepared statement of Mr. Lettieri appears in the 
Submissions for the Record on page 39.]
    Chairman Paulsen. Thank you, Mr. Lettieri.
    And next we'll hear from Ms. Ludwig, you're recognized for 
five minutes.

    STATEMENT OF TERRI MS. LUDWIG, CHIEF EXECUTIVE OFFICER, 
                 ENTERPRISE COMMUNITY PARTNERS

    Ms. Ludwig. Thank you.
    Chairman Paulsen, Ranking Member Heinrich, and Members of 
the Committee, good morning. Thank you for your leadership in 
convening this hearing.
    Thoughtful bipartisan discussion on implementing 
Opportunity Zones is essentially so that this important new tax 
incentive fulfills its founding goal, to revitalize our 
Nation's communities and further economic growth.
    I'm Terri Ludwig. I'm the CEO of Enterprise Community 
Partners, and I've worked in financial services, capital 
markets, real estate, and community reinvestment for 30 years.
    Enterprise's perspective on Opportunity Zones is based on 
our deep expertise as a national leader in affordable housing 
and community development finance and specifically as an 
investor and lender deploying capital in communities.
    For more than 35 years, Enterprise has amplified the impact 
of investment in homes and communities by engaging the right 
partners, directing public and private capital to the right 
places, and offering non-partisan guidance and support to 
government leaders. We've invested $36 billion in equity, 
grants, and loans, in all types of communities, in all 50 
states. We've built or preserved 529,000 homes, helped create 
diverse thriving communities, and touched millions of lives.
    We foster economic mobility and opportunity through a high-
impact investment portfolio that includes not only affordable 
homes, but also health clinics, schools and access to healthy 
foods, and access to public transportation.
    I'm honored to share Enterprise's views on realizing the 
public policy goal that gave rise to Opportunity Zones: 
bolstering inclusive, stainable economic growth. This new tax 
incentive has immense potential to transform communities, grow 
small businesses, and better residents' lives, provided that 
investments are aligned with local priorities and needs.
    Enterprise has strong expertise in aggregating private 
capital and deploying it through programs like Low-Income 
Housing Tax Credit and New Markets Tax Credit. We're eager to 
realize the potential of Opportunity Zones to complement these 
established public-private partnerships.
    Enterprise is exploring Opportunity Fund models that would 
foster inclusive economic growth and prosperity for residents 
and businesses. Our goal is to demonstrate that the capital can 
be deployed to deliver compelling financial returns and social 
returns.
    Any fund we create would incorporate best practices drawn 
on our work over the past 35 years; these include investments 
that develop and preserve affordable housing, create living-
wage jobs, support minority- and woman-owned businesses and 
expand transportation and infrastructure.
    We've been working very closely with governors, mayors, 
investors, and community-based organizations on Opportunity 
Zones. We've gathered and shared data, disseminated critical 
information, and provided technical assistance.
    And what we've seen is that while communities are excited 
about this catalyst for economic development, they're also 
concerned that private investment could unintentionally 
displace the very residents and businesses that the tax benefit 
is intended to support.
    Enterprise believes that there is an important role for 
Federal, State, and local government to play in the 
implementation of this tax incentive. This will ensure that 
investments advance local policy priorities and needs and offer 
sustained benefit to all members of the community, not just a 
few. To support this, we offer two main recommendations for the 
effective implementation of Opportunity Zones.
    First is promoting the transparency of the Opportunity Fund 
activities in order to drive accountability and assess impact 
on communities. Specifically, we recommend requiring that 
Opportunity Funds report to Treasury on transaction-level data 
and that this information be made available to the public. 
Doing so will allow Congress to evaluate whether the tax 
benefit is meeting its intended policy goals.
    Second, the Department of Treasury should use its statutory 
authority, from Congress, to issue regulations to prevent 
abuse. Enterprise suggests that the definition of abuse 
includes investments that adversely affect low-income 
residents, for example, by eliminating affordable homes. Such 
guardrails will help ensure that current residents and 
benefits--and businesses benefit from economic growth in their 
communities. I've provided more detail on these recommendations 
in my written testimony and look forward to addressing those in 
Q and A.
    To conclude, we are enthusiastic about the promise that 
Opportunity Zones hold for urban, rural, and all types of 
communities nationwide. If implemented with transparent 
reporting requirements and an explicit commitment to prevent 
abuse, Opportunity Zones could have a transformative impact on 
distressed communities and, most importantly, on the lives of 
the people who live there.
    Thank you for your willingness to openly explore the 
benefits and the risks of this new tax incentive. Enterprise 
would be pleased to work with you further on these issues and 
on our recommendations to realize the great opportunity 
inherent in Opportunity Zones.
    [The prepared statement of Ms. Ludwig appears in the 
Submissions for the Record on page 47.]
    Chairman Paulsen. Thank you, Ms. Ludwig.
    Mr. Jones, you are recognized for five minutes.

  STATEMENT OF MR. MAURICE A. JONES, PRESIDENT AND CEO, LOCAL 
      INITIATIVES SUPPORT CORPORATION (LISC), NEW YORK, NY

    Mr. Jones. Thank you.
    Chairman Paulsen, Ranking Member Heinrich, and Members of 
the Committee. I'm pleased to join you this morning to discuss 
Opportunity Zones.
    My organization, Local Initiative Support Corporation, or 
LISC, championed the Investing in Opportunity Act legislation 
that became the foundation for this initiative, and we are 
pleased that it was enacted last December as part of the Tax 
Cuts and Jobs Act.
    Over the course of LISC's nearly 40 years of work, its 
comprehensive approach to community development and its broad 
national reach have made it a valuable leader in the fight to 
improve quality of life in communities across the country.
    LISC's greatest success over these years has been working 
with underresourced communities and their residents to help 
them make progress. Today, the growing inequality, concentrated 
poverty, and racial inequity that our country is experiencing 
make the work that we and our partners do as urgent as ever.
    LISC attempts to catalyze opportunity by working at the 
local level to foster resilient, safe, and healthy communities 
in which individuals have financial security, economic choices, 
and a high quality of life.
    With roots that are local, a national breadth, and a 
comprehensive set of products and services, we fight to close 
the opportunity gap in America, through our strong network of 
over 2,300 community-based partners.
    LISC often relies on public/private partnerships to engage 
in the type of comprehensive community development work that is 
needed in low-wealth communities. It's precisely because we've 
seen, firsthand, the impacts that tax incentives can have on 
spurring revitalization, most notably the Low-Income Housing 
Tax Credit and the New Markets Tax Credit, that we believe 
Opportunity Zones hold a great deal of potential.
    We are planning to focus our Opportunity Zones investments 
in three areas where we see the greatest potential to benefit 
community residents.
    First, we will provide growth capital for companies that 
are creating job opportunities for Opportunity Zone residents. 
We will inject equity capital to catalyze the growth of 
manufacturing, advanced manufacturing, healthcare, and 
companies in other growing sectors that are providing quality 
job opportunities that are accessible to community residents.
    Secondly, we will invest in new real estate developments 
and rehabilitation of existing underutilized buildings within 
targeted communities to attract businesses, bringing quality 
jobs to underinvested communities and their adjacent 
neighborhoods.
    And, finally, we will increase the stock of quality 
affordable and workforce housing in Opportunity Zones. We hope 
to raise capital for these investments from mission-aligned 
investors, including corporations located in Opportunity Zones, 
and from the growing impact investment community, in 
particular, high-net-worth individuals, which would represent 
an entirely new pool of investor capital for community 
development finance.
    Since there's no cap on the amount of investor capital that 
can be invested in Opportunity Funds, we believe that the 
Opportunity Zones incentive can spur billions in private 
investment activity in the country's most distressed census 
tracts and play a major role in closing the existing 
opportunity gap that is leaving these communities behind.
    In particular, a large portion of our work occurs in rural 
communities, which are especially underinvested. So we are very 
pleased that preliminary results show that 22 percent, at 
least, of the Opportunity Zones will be in these very 
communities.
    I would like to conclude my remarks by offering a few 
suggestions of how we can ensure that Opportunity Zones 
maximize prospects for investors, while simultaneously 
maximizing benefits for low-wealth communities and their 
residents.
    First, I believe that Congress should consult closely with 
the Treasury Department during the next phase of rulemaking to 
identify whether there are areas that my require statutory 
fixes, particularly those that will provide clarity to 
investors and improve the flow of investments into Opportunity 
Zones.
    Second, I believe the Treasury and the IRS should play a 
more active role in the implementation and administration of 
Opportunity Zones; specifically, we need regulations and 
guidance that not only provide investors with the clarity and 
certainty necessary to make investments in Opportunity Zones, 
but also protect against program abuse and help ensure the 
integrity of the program. They should also play a role in 
collecting and disseminating information about the activities 
of opportunity funds.
    Finally, individual states and municipalities should work 
with the private sector to ensure that Opportunity Zone 
investments provide the most benefit to low-wealth communities 
and their residents.
    I'd like to thank you for this opportunity, and I look 
forward to answering your questions. Thank you.
    [The prepared statement of Mr. Jones appears in the 
Submissions for the Record on page 55.]
    Chairman Paulsen. Thank you, Mr. Jones.
    As we begin the questioning period, I just remind all 
Members to keep their questions to five minutes. And just let 
me begin. And I'll start with you, Mr. Lettieri, and we can 
just go right down the line.
    But, you know, the inclusion of Opportunity Zones in the 
Tax Cuts and Jobs Act, it deserves more public attention. And a 
lot of our colleagues aren't fully aware of it, as well. 
Because it encourages private investment to flow into low-
income communities selected by the states.
    Now, I believe that Opportunity Zones hold huge and great 
promise to help those that are less fortunate and then achieve 
more self-sustaining economic development. And based on the 
testimony we've heard today, I think that my belief is well-
grounded.
    Let me just ask all of you this: What makes Opportunity 
Zones more likely to succeed than the location-targeted 
programs that have been used in the past for this type of goal? 
And also do you believe that there are other market oriented 
reforms at the state and the local level that enhance the 
chances of success?
    Mr. Lettieri, do you want to begin?
    Mr. Lettieri. Yes. Thank you for the question.
    I'll focus on two primary areas. Opportunity Zones were 
designed as a compliment to other tools. It was designed to be 
a new and responsive tool in the broader tool kit for community 
development.
    As I mentioned in my testimony, the fact that it is 
flexible to a wide variety of use cases to be able to support a 
wide variety of types of businesses, itself, is a major plus, 
because what we see in a lot of communities is a variety, a 
variety of needs. We've spent a lot of time analyzing the needs 
of distressed areas around the country. and no two communities 
look alike.
    And so if you have a very narrow prescriptive use case on 
the front end, it means you're limiting the aperture of places 
that can really put that to use in the community.
    And you see this reflected in the selection process, where 
governors have different needs in mind, State by State, as they 
go about the selection process, and they've emphasized 
different needs. For some, it's rural entrepreneurship; for 
some, it's affordable housing; for some, it's access to 
transit; for some, it's just new business formation, where a 
lot of the struggle continues to be for low-income areas. So 
that flexibility is key.
    The scalability that I mentioned, as well. When you don't 
have a scarce resource to allocate, year by year, you're 
talking about something that can be nationally impactful 
simultaneously, without having to pick winners and losers on 
the front end, in terms of who can deploy the capital.
    That's not to say that those models are useless; it's to 
say that they're not sufficient. And so having this alongside 
of those other types of tools is particularly powerful. And as 
I'm sure that others on the panel can speak to, the inner 
activity between Opportunity Zones and other tools could also 
be one of its strongest assets. The fact that it's flexible 
enough not to just meet a wide variety of needs, but to be 
compatible with a wide variety of other tools.
    Chairman Paulsen. Yeah.
    Ms. Ludwig.
    Ms. Ludwig. Sure. I would echo that I support what was just 
said. And I believe that what does distinguish this from other 
programs is that inherent flexibility. And while we all 
appreciate the tools that are out there, I think it's very 
clear that the need is enormous.
    And so I believe this is an additional tool which allows us 
the flexibility to invest in various asset classes, being able 
to also pool resources, not only just with a single investor, 
but being able to pool resources across asset classes and types 
of investors. And that would allow us to both diversify risk 
and opportunities and bring more private capital. And I also 
agree that with further guidelines, we believe a lot of this 
will pair with Low-Income Housing Tax Credits, New Markets, and 
essential tools like this, so.
    Chairman Paulsen. And, Mr. Jones, you also, I think, 
mentioned about we want to prevent abuse and to have Treasury 
step in and offer some additional comments. But in knowing that 
the local flexibility is key, what are some other oriented 
reforms that State and local folks can do to measure----
    Mr. Jones. Sure.
    Chairman Paulsen [continuing]. Or enhancing the opportunity 
here?
    Mr. Jones. Yeah. Let me answer both of your questions and 
just add I agree with what my colleagues have said. Two 
additional things; this is a focus on equity capital, and that 
is key for the places that we're trying to be of service to. We 
need grant capital, we need equity capital, we need debt 
capital. The exclusive focus here on trying to get more equity 
in these communities is a key additional attribute.
    The second piece of it for me on the more likely key to 
success--and, by the way, I think the others are succeeding, as 
well. We just need more tools.
    But the second piece of this is this focus on trying to 
bring in what is now an underperforming asset class in the 
community development space, and that's high-net worth 
individuals, folks who have capital gains to deploy here.
    This--our largest incentive right now is probably the Low-
Income Housing Tax Credit. That's a $9 billion industry. This 
is potentially 2, 3, 4, or 5 times greater than that.
    At the State and local level, look, I think the biggest 
thing that I could see there that would be most helpful is 
making sure that the states work with municipalities and the 
private sector, to market these places that we're trying to get 
investments into.
    This is not going to be an automatic piece here. We're 
going to have to work hard to market rural America so that 
folks know that there's both demand and investable 
opportunities there.
    Chairman Paulsen. Great, thank you.
    Mrs. Maloney, you're recognized for five minutes.
    Representative Maloney. Thank you very much, Chairman 
Paulsen, for this is an incredibly interesting hearing.
    The US economy is generally doing well and, for that, we 
should all be very, very thankful. But as many of us know, the 
economic recovery is not everywhere. There are parts of the 
country that are experiencing the benefits of the recovery and 
other parts of the country that are being left behind. And in 
these areas, unemployment is still high, and wages are 
stagnant.
    In the area of New York that I represent, the geographical 
difference between the haves and the have-nots can be a couple 
of blocks. It can literally be across the street. So I am very 
drawn to the potential of Opportunity Zones to help close that 
gap between these two very different worlds. And I welcome the 
application of a market mechanism to what has seemed like an 
intractable--problem for cities and states. This is an out-of-
the-box idea that deserves very careful consideration.
    Language establishing Opportunity Zones was inserted into 
the new tax law, and I wish we had had time to see this 
language and talk about it before it happened, particularly 
because the language that appeared in the final bill differed 
from what was introduced. But that's water under the bridge, 
and our job now is to explore the potential of these 
Opportunity Zones and to do all that we can to help reach their 
full potential.
    My first question is for Ms. Ludwig. The bipartisan 
Investing in Opportunity Act or as Senator Scott said, ``The 
American Act,'' is not anything, it's just for America, there 
is some text that is different from what Senators Scott and 
Cory Booker introduced. The section on a report to Congress, 
I'd like to thank Mr. Jones and Ms. Ludwig for mentioning in 
their testimony, that this language is missing from the final 
bill.
    That section requires the Secretary of Treasury to submit a 
report to Congress on Opportunity Zones five years after 
enactment of the legislation. And I'll provide a bare-bones 
synopsis. I think it's important.
    The original bills required an assessment of investments 
held by qualified Opportunity Zone Funds, the amount of assets 
in those funds. It also requires, and I quote, ``The report 
shall also include an assessment of the impacts and outcomes of 
the investments in those areas on economic indicators, 
including job creation, poverty reduction and new business 
starts and other metrics as determined by the Secretary.''
    And, in short, it seems that the new tax law was missing 
the language requiring these reporting requirements. And I'd 
like to submit, with unanimous consent, that original language, 
into the record----
    [H.R. 828 appears in the Submissions for the Record on page 
64.]
    Chairman Paulsen. Without objection.
    Representative Maloney [continuing]. And ask Ms. Ludwig: As 
an advocate for affordable housing, can you tell me why you 
support strong reporting requirements and, in the best of all 
worlds, would you encourage Congress to pass a law mandating 
reporting requirements?
    I know that it was in the conference report such language 
that does not have the force of law. I know that Treasury is 
very supportive, but we know that administrations change. It'd 
be good, I think, to have that concrete reporting language 
requirement for oversight and to prevent, as Mr. Jones 
mentioned, any type of fraud or abuse.
    Your comments, please.
    Ms. Ludwig. Yes. Thank you.
    I would agree. I believe the conference report signaled 
that there was broad agreement on the need to, first of all, 
have reporting mechanisms, both for transparency, but also for 
the eventual ability to assess impact. And I think this is a 
program where there is tax benefit, and so I believe 
accompanying with that there should be the transparency and 
accountability that comes with this. I think the conference 
report did a great job of outlining it. So I certainly support 
those impact measurements.
    And I think the only way that we'll be able to look back 
and sit, as Senator Scott said, ``a year from now, two years 
from now or five years from now'' and determine the success of 
this program and hopefully the expansion of this and celebrate 
the success is by having the data to look at where we are.
    Representative Maloney. Mr. Lettieri and Mr. Jones, do you 
agree with her statement to have it; yes or no, because I have 
a final question that is very important to me.
    Would you support----
    Mr. Jones. Yes, you need the information.
    Mr. Lettieri. Yes.
    Representative Maloney. Okay. Thank you.
    In New York, the biggest way to impact economic develop has 
been transportation; the ability to move in and out of 
neighborhoods. If you have good transportation, i.e., subway, 
then it just explodes with economic development.
    And would you support, Mr. Jones, given your background in 
this area, broadening this to include transportation?
    I must say, I was very interested in President Trump's 
statements during the campaign on infrastructure support, which 
have not materialized in the budgets that we've had moving 
forward. So expanding this, would, if the mayor and the 
governors supported it as a major economic force, I just know 
from my experience in city government, State government, 
Federal Government, in terms of economic development, that has 
been the major force that has spurred small businesses, 
activity, economic growth----
    Mr. Jones. Yes.
    Representative Maloney [continuing]. Would you support 
expanding it to include infrastructure?
    Mr. Jones. Absolutely. Infrastructure, transportation, and 
broadband in the rural areas.
    Representative Maloney. Okay. That's great. I don't believe 
the current legislation allows that; is that correct?
    Mr. Jones. Actually, I think it could.
    Representative Maloney. It's not really--I think it could 
be----
    Mr. Jones. It's not explicit, but it could. That could be 
an investment activity. Absolutely.
    Representative Maloney. I'm very excited about it. Thank 
you, Senator Scott, for your leadership on it.
    Chairman Paulsen. Thank you, Representative Maloney.
    And Representative Handel, you're recognized for five 
minutes.
    Representative Handel. Thank you, Chairman Paulsen. And 
thank you, Senator Scott, for your good work on this 
legislation.
    I'm a former county commission chairman, so I'm very 
familiar with enterprise zones and the very real, positive 
impact that they can have, and this seems to be a very 
promising enhancement and an addition to that tool kit to help 
them in this front.
    I want to talk, Ms. Ludwig, a little bit about affordable 
housing. As you know, since the mid-1980s, tax credits have 
been available for investments in low-income housing; yet, we 
still have a real gap there.
    Can you talk a little bit about how you would characterize 
Opportunity Zones in relation to the Low-Income Housing Tax 
Credit?
    Ms. Ludwig. Certainly. First, I would say, the need for 
affordable housing is enormous. And we're seeing, not only at 
the State, but also all the mayors we speak to, that's a number 
one concern for them.
    So I would say, first of all, we need more resources. After 
tax reform, as we know, the Low-Income Housing Tax Credit lost 
value within that, given the tax rate. And so we will, by just 
nature, have 235,000 fewer homes being able to be created by 
the tax credit.
    In the budget, there was an increase of 12.5 percent in the 
Low-Income Housing Tax Credit, but we in the would say we would 
like to continue to increase that tax credit to be able to meet 
those demands of affordable housing needs. It's our hope that 
the Opportunity Zone Funds can pair well with the affordable 
housing sector utilizing Low-Income Housing Tax Credits; 
however, I would say that we certainly need more clarity about 
what is an acceptable real estate investment and what is not.
    It's our assumption that rental affordable housing today 
will be acceptable, but there's certainly the need to get more 
clarity to unlock the wallets of the investors we talk to. 
They're eager to get started, but they need more clarity on 
what's an acceptable investment.
    Representative Handel. Thank you. To follow up on that, as 
we seek to deliver that greater clarity, are there any lessons 
learned from your work that we can take from the Low-Income 
Housing Tax Credit programs and do a better job through 
Opportunity Zones?
    Ms. Ludwig. One of the things I think that is one of the 
best features of the Low-Income Housing Tax Credit is that it 
is essentially a pay-for-success model. First of all, private 
money puts their money in first. And then once units are built 
and it's occupied with people that are in need of affordable 
housing and qualify, then the government money flows.
    Similarly, in Opportunity Zones, you're going to have 
private investors come in, and that's great to unleash that 
private capital. The reason that those private investors have 
been willing to do that in the Low-Income Housing Tax Credit is 
because it's predictable, it's clear, the reporting is there, 
and they have a long compliance and infrastructure that helps 
you know that ``I'm investing in something that has a 15-year 
period of compliance, where I know I'm not only getting a very 
healthy financial return, but also my intended investment to 
create housing for social returns is getting done,'' which is 
why I think we need clarity on the reporting, as well as some 
of the guidelines.
    Representative Handel. Okay. Thank you.
    Mr. Jones, would you like to add anything to that?
    Mr. Jones. I think what I would add is, that the Low-Income 
Housing Tax Credit, by itself, is not sufficient to generate 
the supply of affordable housing that we need. That's what 
you're seeing. And so the opportunity here is to bring in a 
whole new group of investors to affordable housing finance, 
through a new mechanism here that brings, hopefully, high net-
worth individuals into the game.
    Unless we get more investors in affordable housing, we will 
never be able to keep up with the supply needs. That's what 
you're seeing now, and that's why this is a real opportunity 
for us.
    Representative Handel. All right. Great. Thank you.
    And just one comment, I am very encouraged to hear the 
consensus around transparency and accountability so that we can 
really measure impact, because I've seen, first-hand, that some 
projects really work and some projects do not. And this is too 
great of an opportunity for Americans for us to mess it up on 
the early front with bad projects and we need to be really 
laser-focused on having the best possible projects come through 
on this.
    So thank you, Mr. Chairman. I yield back, and thank you.
    Chairman Paulsen. Thank you.
    And Dr. Adams, you're recognized for five minutes.
    Representative Adams. Thank you, Mr. Chairman. And thank 
you to Senator Scott and Senator Booker for your work on this 
issue and to individuals testifying today. Thank you so much 
for being here.
    I believe that Opportunity Zones with the right oversight 
and guardrails have the potential to help underserved 
communities. I submitted eighteen census tracts to our governor 
in North Carolina, Governor Cooper, to be designated as 
Opportunity Zones.
    I specifically targeted census tracts, in the 12th 
District, that had high unemployment rates, sometimes even 
those that tripled the national average; however, it's clear 
that there needs to be more accountability in how Opportunity 
Zones are implemented.
    For example, the IRS recently announced that individual 
investors can become a qualified Opportunity Fund and can self-
certify; thus, no approval or action by the IRS is required. To 
certify--to self-certify, a taxpayer merely completes a form, 
attaches that form to the taxpayer's Federal income tax return 
for the taxable year.
    Ms. Ludwig, should Congress be concerned that rules like 
these can lead to abuse of Opportunity Zones and will not 
provide a positive impact to underserved communities?
    Ms. Ludwig. I do think it's important for us to understand 
what is the intent behind an investor's interest in an 
Opportunity Zone Fund.
    So I do think it is important, again, to keep the 
flexibility and the market-driven approach on this, which is 
different and distinctive. At the same time, demand a minimum 
level of accountability, particularly of investors to say what 
their intent and their intended investment practice will be.
    Representative Adams. Thank you.
    Franchises are also looking at the prospect of Opportunity 
Zones, and I'm eager to learn more about franchising and how 
franchising can accelerate business growth and local 
opportunity in the zones. I want to understand the prospects 
and the impact of franchises in areas that have high 
unemployment rates.
    Nine of my district census tracts that I've submitted to 
Governor Cooper had unemployment rates higher than 12 percent. 
As a matter of fact, some go as high as 18 percent.
    Can you tell us more about franchise businesses, that role, 
and the prospect of their success in Opportunity Zones, 
especially in Opportunity Zones with high unemployment?
    And this question is for you, Mr. Lettieri.
    Mr. Lettieri. Thank you for the question.
    I see tremendous potential in the franchise sector for 
Opportunity Zones. And I think there's tremendous potential 
benefit for the communities as well. We all are familiar with 
examples of people who got their first step on the ladder of 
opportunity working at a franchise. And we've also seen in the 
franchise industry recently, tremendous growth in minority-
owned franchise creation.
    And so, I think, when you think about where the map of 
Opportunity Zones and the map of--and the categories of early 
investment models that can work and hit the ground running, I 
think the franchise sector offers a lot of hope there.
    Here again, I think it's an opportunity to get folks who 
are in an industry that doesn't necessarily have anything to do 
with Opportunity Zones thinking about that map in a different 
way and targeting certain investments and new franchise 
openings in a way that coincides with Congressional intent 
here, in terms of the places that have been targeted.
    So I think that's an area of a lot of potential. I hope we 
see more of that activity as the clarity comes through from 
IRS. And I think, in particular, the overlap of the goal for 
minority-wealth creation, targeting communities of color, as 
you mentioned, many of whom have very high unemployment rates. 
You have to have an asset class of both investments and 
businesses that offer an easy point of entry for people who may 
not be starting with the most skills, but this is a way for 
them to build skills, over time.
    Representative Adams. Thank you.
    The Low-Income Housing Tax Credit is a critical tool to 
develop and preserve affordable rental housing. We are in 
serious trouble in our community in Charlotte, so many folks 
who need it. I want to be sure that Opportunity Zones can be 
used in a complementary manner with the Low-Income Housing Tax 
Credit, and I'd like to ensure the maximum growth of affordable 
housing. So this is to Mr. Jones or anyone else who wants to 
answer that.
    Mr. Jones. I think that's one of the big opportunities 
here. We're about to go down to Charlotte next week and we're 
there to announce a fund that will be designed to try to bring 
about the development of more affordable housing in the 
Charlotte area. Opportunity Zones are going to, hopefully, be a 
great tool in bringing investors to that fund.
    Representative Adams. Great. And we look forward to working 
with you.
    Ms. Ludwig.
    Ms. Ludwig. Yes. And we were encouraged several of the 
states that we were working with said, ``Let's be very 
intentional about even the selection of Opportunity Zones to 
make sure that as we do that, that we are setting very specific 
strategies at the local and State level to preserve affordable 
housing,'' which I think is a practice that needs to be 
widespread.
    Representative Adams. Thank you.
    Mr. Chairman, I'm out of time. Thanks very much.
    I yield back.
    Chairman Paulsen. Thank you.
    Representative LaHood, you're recognized for five minutes.
    Representative LaHood. Well, thank you, Mr. Chairman, for 
having this important hearing today. And obviously, these 
Opportunity Zones offer tremendous potential for our country, 
and I'm excited to hear the testimony here today and the 
different ideas. And Senator Scott, thank you for your 
leadership on this also.
    Ms. Ludwig, in your testimony, you mentioned Enterprise is 
exploring Opportunity Fund models that would allow you to 
invest and promote economic growth. Can you explain how these 
specific models are composed and then what characteristics does 
an ideal investment opportunity have?
    Ms. Ludwig. So thank you. We are at the beginning stages of 
creating funds. We're talking to investors and localities 
about, first of all, what the needs are, but certainly it's our 
hope that we will be able to create a fund that is very, 
certainly, first of all, real estate focused and, specifically, 
affordable housing. And also, we're talking to investors, for 
example, about adaptive reuse. So going in and taking old 
warehouse buildings and turning that into workforce housing or 
affordable housing. How do we make sure that we have that piece 
because that is one of the most basic primary needs of the 
folks that we serve, is to have affordable housing.
    Secondly, we're working to consider exactly what is the 
kind of small business capital that's needed; is that early 
more catalyst money or is that growth capital?
    And secondly, we also think it's important, we've heard 
from a lot of folks in smaller towns and in rural communities, 
that they also want to think about how they could couple that 
with an accelerator kind of function, because they want to be 
able to demonstrate to private investors that they cannot only 
catalyze new businesses but also support existing businesses, 
but have an accelerator kind of function attached to that.
    So those are two areas that we're certainly looking at 
right now. But we hope that there will be other ways we can 
also support communities. So we're looking for further guidance 
regarding things like infrastructure in rural communities, 
water, sewer, infrastructure. We think about housing as 
infrastructure often, but we want to make sure that we can come 
up with acceptable uses, as my colleague said before; 
broadband, are there ways that we can support that through an 
investment vehicle?
    And simply the one item that would help us be able to get 
into action about having capital flow, is certainty. Investors 
like certainty, to know exactly what qualifies and what 
doesn't, so that we can get out of the box with investment 
dollars.
    Representative LaHood. Thank you for that.
    Mr. Lettieri and Ms. Ludwig and Mr. Jones, we've heard a 
little bit about enterprise zones around the country, TIF 
districts. If we look at models or platforms around the country 
that have been examples of where this has worked, can you talk 
a little bit about that, maybe Mr. Lettieri or Ms. Ludwig, on--
I mean, is there an example or a model that you can point to 
where this has worked very effectively, and particularly as we 
look at, you know, the components of distressed communities, no 
high school diploma, housing vacancy rate, adults not working, 
poverty rate where those statistics have been improved and 
we've done exactly what we want to do here?
    Ms. Ludwig. Sure.
    Mr. Lettieri. I think there are elements that have worked 
in a variety of different programs. What we've missed is, I 
think to Mr. Jones' point earlier, we really haven't had a 
robust equity investment incentive piece in previous attempts, 
and especially one that was coupled with the type of flexible 
use cases that we're talking about here.
    When you talk about a wide variety of needs, if you have a 
narrow prescriptive policy on the front end, it's very hard for 
that to be malleable, especially over time, as communities 
change and develop and as the needs shift, hopefully as a 
result of success.
    And so where you see in the more recent post-recession 
period where you've had dramatic turnaround and you look at 
cities like Detroit, there are a lot of challenges still in 
Detroit, but part of that turnaround, you have to ascribe to 
the catalyst of a major private investment initiative happening 
without even the benefit of a lot of Federal incentive that has 
helped to catalyze a wide variety of other activities, both 
philanthropic and private sector alongside of it.
    And not every city has a motivated philanthropist or a 
motivated set of private investors who are already organized 
around that city. In fact, most places don't. That's the 
challenge.
    And so when you're talking about aggregating the impact of 
thousands of investors from around the country and being able 
to direct that equity capital into prescribed areas where you 
knew the investors can count on the fact that there's 
intentionality, the governor has chosen these places, mayors 
have had input, stakeholders have come together. That's a 
signal to the marketplace that there's some kind of 
intentionality behind this particular place and presents a 
rallying opportunity.
    And it's important here that what this offers is not for 
any individual investor to take on the risk by him or herself. 
This is about collectivizing the assets and the ingenuity of 
the private sector to apply to those challenges.
    So that's really where I think this differentiates from 
past approaches. It's learned some lessons. And I think that's 
incorporated here, in terms of what you see with the structure 
of Opportunity Zones that you don't get as much of in other 
policies. That's the potential, is that you're aggregating, 
you're focusing, you're signaling to the marketplace that this 
is the right type of place to invest and you're going to have 
partners on the ground coming alongside of you because of that 
intentionality that the governors have selected.
    Chairman Paulsen. Thank you.
    Representative Delaney, you're recognized for five minutes.
    Representative Delaney. Thank you, Mr. Chairman.
    And I want to join with my other colleagues in thanking 
Senator Scott for his truly singular leadership on this very 
important piece of legislation. So thank you, Senator. And I 
also want to thank all of our witnesses here for their work in 
making this happen.
    My first question is for Mr. Lettieri. When you think about 
what's happened, it seems like there's been a tremendous amount 
of interest among investors since this was passed into law. And 
so that's the good news, right? There's plenty of investors, 
whether they be very large private investment firms or 
entrepreneurs who are looking at this. How much do you worry 
that there will be just a lack of deal flow coming out of these 
communities because that really seems like the bottleneck, 
whether there's actually enough technical expertise on the 
ground to produce the deal flow that all these investors are 
really looking for?
    Mr. Lettieri. I think that's a great question. So among the 
things that would keep me up at night about this, this would be 
one of them, is that there's a reason that the economy is not 
working well in some places. There's both public and private 
sector neglect, in many cases.
    And so, again, just the designation of Opportunity Zones is 
not enough to guarantee any kind of follow-on activity. That's 
why it's so important that, at the State and local level, you 
have real stakeholdership, on an ongoing basis, from governors 
and mayors to develop a strategy to partner with local 
foundations, philanthropies, business incubators, and others 
who can help to raise the stakes and elevate the potential deal 
flow.
    So there's a lot of facilitation that's required in many 
places. And the harder hit the area, the more of that 
facilitation you're going to need. But what I'm confident in is 
that if you can get that type of local engagement going, that 
these are areas that are underinvested. There's a lot more 
potential than what the marketplace reflects.
    Representative Delaney. So any ideas you have for us, 
obviously we'd love to hear them specifically.
    Ms. Ludwig, when I think about turning around these areas, 
I've always thought about, kind of, a four-point strategy, this 
being one of them; the second being social impact bonds, pay 
for success, which I know you all are big champions of; the 
third being more infrastructure; and kind of the fourth is 
creating incentive for more demand in these markets.
    And one idea I've worked on is dramatically expanding 
HUBZones, which basically creates an incentive for government 
contractors to locate in these Opportunity Zones, and I think 
the overlap will be very similar.
    How do you think about that, in terms of these other 
programs, if we were to do more in those other three areas, 
recognize we got this done, how much of that would kind of 
accelerate the development of these Opportunity Zones?
    Ms. Ludwig. Absolutely. I think it's going to take all of 
those things in some of the places that have been circled where 
they have very high poverty rates and need long-term 
investment. And so I feel very strongly that we're going to 
need one of the things that you're talking about, what you've 
seen is, public and private partnerships come together, in 
different formats, to bring that kind of capital and that long-
term orientation to bear and understand that it's going to take 
different layers. It also takes a different set of assets.
    So we talked a lot today about affordable housing, but it 
also takes schools, and it takes retail, and it takes a 
comprehensive approach. And so I think those different tools 
allow us to bring those together to really drive the impact.
    Representative Delaney. Right. And I'd love to hear the 
different panelists follow up with us about how they think we 
could create more incentives for government contractors to 
actually go in these places.
    Mr. Jones, when I think about infrastructure, you talked a 
lot about the different kinds of portfolio of asset classes, if 
you will, that we could be putting in these markets, and I 
think you were really smart to emphasize how this is equity, 
which is ultimately what you need to expand the community, as 
opposed to just people kind of financing existing assets.
    One of the things I'm focused on is infrastructure in these 
communities. But one of the issues with infrastructure, if I 
was thinking about investing in infrastructure, whether it be 
maybe broadband or even transportation, I'd probably come to 
the view that unless I was doing it in Puerto Rico, where the 
whole place is an Opportunity Zone, I would want to invest in 
an infrastructure kind of asset that would probably touch the 
Opportunity Zones, but touch other areas. Do you see what I 
mean?
    So because just the way an infrastructure asset is rarely--
again, Puerto Rico, where the whole island is an Opportunity 
Zones, so you could do any infrastructure there, and it would 
work. Do we need to do any correction to these rules, to allow 
someone who wants to come in and build rural broadband, but the 
way they're going to roll it out only touches the Opportunity 
Zones and not the rest, how's that going to work?
    Mr. Jones. I think that's certainly worth looking at. 
Although, when I think about the need for, let's say, rural 
broadband, most of the census tracts that we're talking about 
are contiguous and would qualify.
    Representative Delaney. Got it.
    Mr. Jones. And so I think----
    Representative Delaney. If you invest in that--if you 
invest in a company that's got its assets in an Opportunity 
Zone and not in an Opportunity Zone, but it has to roll out 
that way----
    Mr. Jones. Right.
    Representative Delaney [continuing]. Like, let's say a 
transportation asset or something like that, how is that going 
to work? Does anyone have a view as to--do you allocate part of 
the investment to the Opportunity Zone, or how does that the 
work?
    Does anyone know?
    Mr. Lettieri. Yeah. I mean, the statute requires the 
business to have substantially all of its properties in the 
zone or zones.
    Representative Delaney. Like 90 percent of them.
    Mr. Jones. It could be in multiple tracts that are all 
qualified, but the challenge of something that straddles----
    Representative Delaney. That's what I'm getting at.
    Mr. Jones. That really you're talking about--from a 
business standpoint, you're talking about either a spinning off 
of a subsidiary or a separate standalone entity. There may be a 
variety of models. But you're right, it's trickier when it 
comes to infrastructure, because of the cross-jurisdictional 
nature.
    Representative Delaney. Yeah, because clearly, if you want 
to invest in infrastructure asset, it's probably going to have 
a very big footprint, and it's likely to be in and out of an 
Opportunity Zone. So any ideas you all have as to how to--
because I think this is a critical investment area we want to 
attract, how to fix that up, that would be great.
    Chairman Paulsen. Well--and it's probably another example 
of an area whether you don't want to have the investment 
happening and then think that that's fraud or abuse or----
    Representative Delaney. Right. no.
    Chairman Paulsen. You have to have that tie-in, so the 
rules allow that. Thank you.
    Representative Comstock, you're recognized for five 
minutes.
    Representative Comstock. Thank you. Good morning and sorry 
I was running late. We had a women's veterans event this 
morning that our women's caucus was participating in.
    I welcome our former Virginia commerce secretary, Mr. 
Jones. Thank you for being here today.
    And I guess this is, I'm sure you're aware of our regional 
area in Virginia and Mr. Delaney's area in Maryland are under 
consideration for Amazon. And the Wall Street Journal recently 
reported that some large cities were denied by Amazon as a 
location for their second HUD quarters. And now some of them 
are planning improvements in response to better track firms in 
the future.
    So things like local transit, workforce training in 
particular, was a big thing. So as we tried to look 
particularly in the technology area in making sure what my 
constituent Steve Case calls ``The rise of the rest.'' He's 
going round the country and really talking about we know we 
have talent out there in the technology area.
    So is there a lesson? What are some of the best policies 
you're seeing in place, and how can this be used to get the 
21st Century technology jobs into these distressed areas? 
Because often, whether it's cyber security or some of these 
other skills, you do not need to be going to college for four 
years, not that that's disqualifying in any means.
    But Capital One has done some cyber security training 
programs with disadvantaged populations that have huge success 
in others. So how can we use the Opportunity Zones to 
capitalize in the area of technology for these populations?
    Mr. Jones. So let me just start, and then my colleagues can 
chime in.
    One of the things that Amazon has been asking about in all 
the places that it has been looking is: What's your plan to 
ensure that we have enough supply of housing, affordable 
housing?
    And so, what you're finding is that these technology 
companies know that if they're going to attract and keep 
talent, and, frankly, if they're also going to keep goodwill in 
the places where they go, they've got to be concerned about 
things like housing and workforce training and transportation 
and their impact on them.
    And so Opportunity Zones do provide a tool for places like 
Northern Virginia and Maryland and D.C. to actually collaborate 
on an affordable housing plan for an Amazon investment.
    So, yeah, I think Opportunity Zones can definitely be one 
of these things that you use to make sure that you address 
those issues that now all these technology companies are having 
to wrestle with, particularly their impact on the cost of 
living in those places.
    Representative Comstock. Right.
    Ms. Ludwig. Thank you. Building on that, I completely agree 
that is of primary importance. And I would also say that it's 
our hope that Opportunity Zone Funds will be created to 
specifically help entrepreneurs that are bringing cutting-edge 
technologies to bear to change whether it's the effectiveness, 
the efficiency, the cost structure of the work that we do, the 
new ideas and the innovation that we think needs to be brought 
to bear, to help catalyze change in communities.
    In order to do that, I think it's very important that we 
consider how we could use Opportunity Zones funding for 
minority-owned, for women-owned businesses, which as we know, 
have received just such a limited supply of equity capital. 
This is----
    Representative Comstock. Particularly in the technology 
area.
    Ms. Ludwig. Particularly in the technology area----
    Representative Comstock [continuing]. Was 90, 95 percent 
white male.
    Ms. Ludwig. Exactly. So how do we do that and use this in a 
way that catalyzes that kind of business and that innovation 
and creativity that is there that needs to be unleashed?
    I also feel that it's an opportunity for folks who 
understand our communities deeply, to have them be part of 
those solutions and to give them capital to respond, which I 
think is the intent of this.
    Mr. Lettieri. I want to build on that, because as you look 
at the map of Opportunity Zones, many of these places have 
anchor institutions, knowledge centers, universities that spin 
off commercializable technology and IP. It's just that it 
doesn't stay in the Opportunity Zones. It goes to the Bay area, 
to Boston, New York.
    And part of that, a big part of that is proximity to 
funders. So now you have an asset class of investors who 
actually have an incentive to keep you in close proximity to 
the community and help you scale there.
    One of the best things we can do for Opportunity Zones 
communities is to help infuse them with the technologies and 
industries of the future. We know that's where the economy's 
going. And if they're devoid of those types of industries, 
they're going to constantly be playing catch-up with the rest 
of the country.
    Capital is a really important facilitator for that. And 
with that comes the stakeholdership of expertise and mentorship 
by investors, who then care not just about the business, but 
the community itself, because the two are so closely related.
    So I think about a place like Johns Hopkins in Baltimore 
and the potential there, in the life sciences and technology 
arena, you have tremendous anchor institutions in places that 
have high need. I think making sure we get that connectivity 
right is one of the right potentials of Opportunity Zones.
    Representative Comstock. Thank you. I see time is up here. 
So thank you.
    Chairman Paulsen. Thank you Representative Comstock.
    I know Senator Sasse just came in. Did you get yourself 
situated there?
    Senator Sasse. It will take a little bit of time to get 
oriented.
    Chairman Paulsen. And maybe as you just get oriented real 
quick, because you may be our final questioner here.
    But real quick, I was going to follow up on some of what 
Representative Comstock was asking about. Are there other large 
investment--someone had mentioned--Ms. Ludwig, you had 
mentioned the funds. When will we know if the funds are 
emerging--or I can't remember who mentioned it--but when will 
we know if these funds are sort of beginning to--when they're 
out there?
    You know, how long will it be before we sort of have a 
track record of, sort of, following when the funds are going to 
be materialized?
    Ms. Ludwig. Sure. I'll ask my colleague to maybe talk on 
the technicalities of the timing. But I do think that given 
people are going to be self-certifying, we can't see that 
necessarily exactly.
    What I would say is that we do see investors or folks that 
want investment, people that are starting to say--well, the 
investors, they want to be coming into funds. We're seeing that 
kind of activity today. And they're asking us, How can you help 
us to create a fund that would meet our needs, whether it's at 
the local level, national level, or State level?
    Secondly, we're seeing people that are asking, ``Does this 
investment meet those needs?'' And they're trying to start to 
create their pipelines. Particularly in the rural areas, 
they're saying that in order to really compete, we know we're 
going to have to start developing pipeline very quickly to 
compete. And so that's what we're seeing already today. And it 
is our hope to be very soon starting to acquire assets that 
could go into a fund.
    Chairman Paulsen. Mr. Lettieri, do you just want to add 
real quick?
    Mr. Lettieri. I do. We're very early in the implementation 
process. So the fund creation is going to happen in waves, in 
my view. You're going to have some folks who, today, they know 
that their model works within the statute. They don't need a 
lot of additional clarity. They have knowledge of the deal flow 
in these communities. They can hit the ground running. I think 
the folks we have on this panel are great examples of tons of 
expertise in these communities. They know what types of needs 
are not being fully met, and they know the types of funders to 
target.
    Then there's a second wave who are going to need a lot more 
clarity. We could have it in a couple months, but we don't have 
it today, from Treasury and the IRS. And as that comes in, a 
whole other wave, I think, a broader aperture of folks that may 
not traditionally be in community development may find their 
way into it as more clarity from the IRS comes through.
    And then as the market matures over time and the 
infrastructure of Opportunity Zones that's created to 
facilitate that investment to elevate additional deal flow, 
then you'll see a third wave of investors emerge, as well.
    So I think this is a long-term process. I think this year 
is going to be a critical period, as it always is for 
implementation. But the, if it goes well, I think you're going 
to see fund creation really into the outer years as more and 
more knowledge of things develops. In the investor community, 
only a small fraction of investors are even aware that this 
exists. So we won't really know the full answer to that until 
that awareness increases.
    Mr. Jones. I would just add to what my colleague said. I 
think the other factor that will influence how quickly funds 
get up and running is how aggressive at the local level, again, 
states and other folks are out there promoting the zones, 
marketing these places as places where there's both demand and 
investable opportunities.
    So what you may see in terms of speed of the development of 
funds may depend as much on how aggressive we are in states, as 
anything else. Because that said, at the end of the day, where 
the feet on the street will exist will be the dispositive issue 
on this.
    Chairman Paulsen. Okay. Thank you.
    Senator Sasse, you're recognized for five minutes.
    Senator Sasse. Thank you, Mr. Chairman. Thank you to the 
three of you for being here.
    Mr. Lettieri, I'd like to look at some of the issues 
behind--the broader need for these economic empowerment zones. 
In 2018, organization highlighted three particularly disturbing 
trends. First, the new start-up rate is at record lows, having 
dropped by 50 percent since the late 1970s.
    Second, our committee is becoming more consolidated in 
larger firms. For example, the total number of firms in the 
U.S. from 2007 to 2014, despite population and economic growth, 
overall dropped by more than 180,000 firms.
    And third, economic growth is largely clustered in the most 
populous metro regions in the country and incredibly unevenly 
distributed across the great Plains in the Midwest.
    First, could you explain sort of the background story 
behind that third issue? Why is this consolidation happening?
    Mr. Lettieri. Thanks for the question.
    The consolidation is more a function of those major hubs 
being resilient than it is of them pulling away in real terms 
from everybody else on the creation side.
    And by that I mean, the overall number of new business 
starts in the country has dropped dramatically, particularly 
with the onset of the Great Recession, and it has not 
rebounded. So the latest data that we have now shows almost no 
recovery in new business formation rates. So we're in uncharted 
territory on that front.
    The places that have been the most resilient amidst that 
national decline have been the largest differentiation with the 
rest of the country. But it's not because they're doing better 
than ever, it's because everyone else is doing worse than ever, 
in terms of the creation side of the economy.
    So that presents a real challenge for low-income areas. 
Obviously, they're among the hardest hit on the creation side 
of the economy. The new business formation rates there are 
particularly low. You see this as a regional story. The Midwest 
being one of those regions, whether it's cities or rural, you 
have particularly low formation rates.
    And that's something that--it's obviously a bigger 
challenge than what this alone can solve. But a big part of the 
connective tissue is access to capital. And so we don't fully 
understand why it's happening, but it's unmistakable in the 
data. We're living in a very different environment, in terms of 
economic dynamism.
    Senator Sasse. Would either of the other two of you like to 
add to that?
    Ms. Ludwig. No.
    Mr. Jones. I think the other piece to add to that is a lot 
of this clustering also reflects where the talent is right 
now--or let me put it another way: where the prepared talent is 
for the economic opportunities. And I know where we're working. 
We're working in places where 70 percent or so of our residents 
have high school diplomats or GEDs. But we are testing them 
when we're doing our workforce work, and what we're finding is 
70 percent of them are, despite having those credentials, are 
probably--they have competences in literacy and math at the 
sixth to eighth grade levels.
    So this goes back to a point we made early. For this to 
really work, it's not an isolated tool. Workforce development, 
economic development, these incentives have to come together to 
create a strategy for a particular place. And the most 
important strategy is get the talent prepared for the 
opportunities. You do that, and the opportunities will come to 
you.
    Senator Sasse. And, Mr. Jones, if you were ``King for a 
day,'' and you could a put a bunch of chips on one of three 
bets, K-12, educational preparedness, workforce training and 
redevelopment for people post age 18 or sort of mobility 
incentives to try to think about the inequality across 
geography, where would you spend most of your chips?
    Mr. Jones. Now you're going to get me trouble, sir.
    [Laugher.]
    Senator Sasse. That is not my intent, Mr. Jones.
    [Laugher.]
    Mr. Jones. But I like the notion of being ``King for a 
day.''
    [Laugher.]
    I would put my----
    Senator Sasse. It's way better than legislature.
    [Laughter.]
    Mr. Jones. Honestly, I would put my bet on preparing people 
for the 16 million middle-skilled jobs that this country has to 
fill between now and 2025 that require solid secondary 
education and post-secondary licenses and certifications and 
apprenticeships. That's where I would put my bet, because if 
you ask employers where they're having the hardest time filling 
jobs, and these are good-paying jobs, it's welders, it's 
coders, it's medical technicians, it's electricians it's 
plumbers, it's construction. That's where I would put my bet, 
because it's also quicker. And our need for a prepared 
workforce is today. And that is what's most needed for the 
competitiveness of the country.
    So if I were king, that's where I'd put my bet.
    Senator Sasse. Ms. Ludwig.
    Ms. Ludwig. Yes, the king, the kingship. I would say that 
the----
    Representative Comstock. Or the queenship will.
    Ms. Ludwig. I was thinking queenship, but it felt strong.
    You know, earlier in this testimony, we talked about one in 
five children in our country living in poverty, on average. And 
in many of the communities that were circled by the Opportunity 
Zones, it was three of ten or even half the children in 
poverty.
    So I sit here today thinking that we need to pay it 
forward. We need to invest in education and workforce. And so, 
yes, we have to make our choices, but I think when I'm talking 
today to educators, they can't get their kids educated, because 
there's not enough housing. Doctors can't keep their patients 
healthy, because there's not enough housing and education.
    These things all play together, so I do think that it's 
really important that we work with private sector, with the 
government to establish the public-private partnerships that 
recognize that these problems are connected, and we need to 
work together to drive outcomes in a really clear, 
comprehensive way.
    And I think you've hit on some of the most important 
priority areas that we can invest in, and I think our future 
truly depends on it.
    Senator Sasse. I won't try to get any of you in trouble on 
this by having to agree with me, but I think implicitly you're 
arguing, given that our entitlement programs are overwhelmingly 
focused on senior citizens and we have, compared to life 
expectancy, the earliest retirement of any in civilization 
ever.
    There's some pretty serious misalignment between where 
we're investing and what we need. The Senate has just called a 
vote, and the Chairman is going to gavel me out, so thank you 
three for your work.
    Ms. Ludwig. Thank you.
    Chairman Paulsen. Thank you, Senator.
    I'd like to thank all of you for taking the time to be here 
and appear before the Committee today. This testimony has been 
wonderful. And I just want to remind you that should Members 
wish to submit questions for the record, the hearing record 
will remain open for five business days. And with that, our 
Committee is adjourned.
    Ms. Ludwig. Thank you.
    Mr. Jones. Thank you.
    [Whereupon, at 11:27 p.m., Thursday, May 17 2018, the 
hearing was adjourned.]

                       SUBMISSIONS FOR THE RECORD

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    I call this hearing to order.
    Good morning and welcome to today's hearing on ``The Promise of 
Opportunity Zones.''
    America's new economy is finally taking off. The Congressional 
Budget Office (CBO) now projects 3.3% growth for 2018, the highest 
annual growth rate since 2005, up from the meager 1.9% it estimated 
prior to the Tax Cuts and Jobs Act and regulatory reforms.
    While all Americans benefit from faster growth, we can and should 
take special care of those communities who are in greater need of 
support.
    Some communities, both urban and rural, are having a particularly 
difficult time.
    The new tax law contains a provision that deserves more public 
attention, one that is designed to help lower-income areas.
    The law provides a capital gains tax incentive to encourage long-
term private investments in communities that have had difficulty 
attracting jobs and new businesses.
    Unlike past targeted incentives, the areas are selected by 
governors, who know the unique needs of their communities, instead of 
by the Federal Government.
    Opportunity Zones have been a bipartisan, bicameral initiative. The 
House author of the original legislation, the Investing in Opportunity 
Act, is former Representative Pat Tiberi, who chaired this Committee 
until January of this year. We are honored to have the Senate author 
with us today, Senator Tim Scott of South Carolina.
    Opportunity Zones hold the promise of flexible, innovative 
solutions.
    Flexibility is important because the reasons some areas lag 
economically vary across communities and regions.
    A factory central to a town's economy may have closed, leaving 
workers searching for new skills and jobs, that is, if they haven't 
giving up entirely.
    The area may have underperforming schools.
    They may lack access to capital.
    Excessive taxes and regulation may have made it difficult to start 
or maintain a business.
    The community may be struggling with rampant drug and alcohol 
abuse.
    This is why one-size-fits-all Federal spending programs or 
incentives to invest only in particular activities are not well suited 
to address each community's unique set of challenges.
    This is also why Opportunity Zones, which allow the private sector 
and local communities to innovate and collaborate on the best 
solutions, have much greater potential for meeting those unique needs.
    John Lettieri, one of our distinguished witnesses today, put it 
well in a recent op-ed in The Hill. He noted that previous location-
targeted programs had an `` . . . overly prescriptive, top-down 
approach that left no room for local experimentation.''
    Opportunity Zones, on the other hand, will bring, `` . . . the best 
possible mix of investments in new and expanding businesses, 
infrastructure and energy projects, commercial real estate, affordable 
housing, and more.''
    Opportunity Zones also hold the promise of local knowledge and 
engagement. They are chosen by governors who know their communities 
well and not by Federal planners with a formula-based spreadsheet.
    Across the country, there are about 8,700 Opportunity Zones.
    My own State of Minnesota is hoping to attract additional long-term 
private investment into 128 census tracts recently selected as 
Opportunity Zones.
    State and local leaders can also help their communities in thriving 
by collaborating and removing unnecessary barriers to starting a 
business, such as overly prescriptive occupational licensing or local 
zoning ordinances.
    Opportunity Zones also hold the promise of access to a large amount 
of untapped capital. Investors who reinvest capital gains from another 
investment into these zones can temporarily defer taxes.
    Investments are pooled in Opportunity Funds so that no single 
investor has to have specialized knowledge about how and where to 
invest since those decisions can be made by experts who manage the 
funds.
    The longer investments are held in Opportunity Zones, the more the 
capital gains relief grows--a strong incentive to invest in a community 
for the long haul.
    This also encourages fund managers to invest in enterprises that 
will yield the most success and prosperity for a community.
    With an estimated $6 trillion in unrealized capital gains and no 
up-front State or Federal cost, the potential for investment flowing 
into struggling communities is almost limitless.
    We have a highly knowledgeable panel of witnesses today who have 
been engaged in the Opportunity Zone initiative and whose observations 
and insights I very much look forward to hearing.
    Before I introduce the witnesses, I now recognize our Ranking 
Member, Senator Heinrich, for his opening statement.

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  Prepared statement of Hon. Cory A. Booker, a U.S. Senator from New 
                                 Jersey
    Thank you very much, Mr. Chairman.
    The Opportunity Zones program, based on the Investing in 
Opportunity Act that I introduced with Senator Tim Scott in 2015, 
creates a powerful new tool for promoting lasting economic development 
in the places that need it most. The purpose of the legislation was 
ambitious: incentivize private investors to invest their inactive 
capital in high-impact projects in economically distressed 
communities--in places like Camden and Newark in my home State of New 
Jersey. In doing so, we can unleash a wave of transformative investment 
and revitalize hard-hit rural and urban communities across the country.
    I'm grateful to the witnesses at today's hearing for participating 
in this initial review. Only with careful oversight can we ensure that 
this new tool is used to fulfill the important goals that Congress 
intended--to bring investment and opportunity to the hardworking 
Americans who live in economically distressed communities.
    While some parts of the country have seen great economic gains in 
recent years, many communities have struggled, and the gains have been 
uneven. By many measures, the decade since the Great Recession has been 
the most geographically unequal economic recovery of the modern era\1\: 
from 2010 to 2016, metropolitan areas with more than a million 
residents accounted for two-thirds of the growth in the country's 
economic output, and almost three-quarters of net job creation 
nationwide.\2\ Many smaller metropolitan areas and rural areas have 
seen much slower growth, or declines, in output and employment.\3\ The 
economic pain has been especially acute in many smaller cities that 
were once powered by a strong manufacturing base, as well as in 
communities of color.\4\ All told, today, one in six, or 50 million 
people, live in economically distressed communities.\5\ These 
communities struggle with a lack of investment, business growth, and 
job growth, leaving millions of Americans unable to share in our 
national economic growth.
---------------------------------------------------------------------------
    \1\ Economic Innovation Group, The New Map of Economic Growth and 
Recovery (May 2016), http://eig.org/recoverymap.
    \2\ Mark Muro & Jacob Whiton, Geographic Gaps Are Widening While 
U.S. Economic Growth Increases, Brookings Institution (Jan. 23, 2018), 
https://www.brookings.edu/blog/the-avenue/2018/01/22/uneven-growth.
    \3\ Id.
    \4\ Alan Berube & Cecile Murray, Renewing America's Economic 
Promise Through Older Industrial Cities, Brookings Institution (Apr. 
2018), https://www.brookings.edu/research/older-industrial-cities.
    \5\ Economic Innovation Group, The 2017 Distressed Communities 
Index 9 (2017), http://eig.org/wp-content/uploads/2017/09/2017-
Distressed-Communities-Index.pdf.
---------------------------------------------------------------------------
    The Opportunity Zones program advances the fundamental ideal that 
every community should be able to realize its full entrepreneurial 
potential, and that as our economy grows, all Americans should 
benefit--not just those at the top. Today, American investors have 
trillions of dollars sitting on balance sheets in the form of 
unrealized capital gains that can be reinvested to stimulate growth in 
high-need communities. Through a set of targeted incentives, the 
program encourages re-investment of this inactive capital in high-
impact projects in State-selected ``Opportunity Zones,'' supporting new 
businesses, local infrastructure projects, construction or 
rehabilitation of facilities, and redevelopment of blighted properties 
in economically distressed communities.
    Now, as we implement the Opportunity Zones program, we must take 
appropriate steps to ensure that its incentives support projects that 
benefit the residents of economically distressed communities, in line 
with the legislative intent. In particular, the Treasury Department 
should use its regulatory authority to ensure that Opportunity Funds 
realize their potential to transform communities and benefit local 
residents. With appropriate guardrails, the Treasury Department can 
ensure that Opportunity Fund investments are targeted to truly high-
need communities and in projects that support inclusive economic 
development.
    The investment incentives created by this program represent a 
remarkable opportunity to catalyze entrepreneurship and promote long-
term investment in economically distressed communities. I look forward 
to working with the Treasury Department, private investors, community 
leaders, and other stakeholders to ensure the Opportunity Zones program 
serves these crucial goals.
    Thank you very much, Mr. Chairman.
                               __________
   Prepared Statement of Hon. Martin Heinrich, Ranking Member, Joint 
                           Economic Committee
    I'd like to thank Chairman Paulsen for holding today's hearing. I 
also want to recognize my colleagues Senator Booker and Senator Scott 
for their important work to create a new incentive to invest in 
communities with high poverty and persistent unemployment.
    Mr. Chairman, my good friend Senator Booker couldn't be here this 
morning, but provided a statement and asked that it be entered into the 
record. It is good to have my colleague from South Carolina here with 
us today--Tim, I look forward to your testimony, and I want to thank 
you and Cory for your leadership on this issue.
    Even today, more than 10 years after the recession began, the 
recovery still hasn't reached many communities--both rural and urban. 
In New Mexico, our statewide unemployment rate is almost 50 percent 
higher than the national average, and, in some areas, it's much higher.
    Across the country, there are more than 50 million Americans living 
in distressed communities. There's enormous talent in these 
communities, but we've underinvested in it.
    While the Chairman and I disagree on the underlying Republican tax 
bill, a partisan bill that continues to leave working Americans behind, 
we do agree that Opportunity Zones hold the promise to direct some 
much-needed financial investment to places like New Mexico.
    Opportunity Zones are an important addition to the toolkit. They 
can support investments in affordable housing and small businesses 
while spurring job creation. And they can help lift living standards in 
neighborhoods across the country.
    The new Opportunity Funds have the potential to attract high-net-
worth investors who previously have not invested in low-income 
communities.
    Thanks to the long bull market, many investors are sitting on 
substantial unrealized capital gains that we can put to work generating 
housing, jobs, and growth.
    What distinguishes Opportunity Zones from other Federal efforts to 
stimulate growth in distressed communities, such as the New Markets Tax 
Credit, is flexibility.
    There are few investment constraints. Funds can invest as much as 
they want. There is no competition to receive the benefit.
    But with this flexibility, there is risk that the social impact 
will be not as great as we would like.
    To achieve broad public benefits, projects should be part of a 
community strategy to create jobs, boost entrepreneurship, increase 
affordable housing, and promote economic development.
    Investors should also tap the vast expertise that exists in the 
private, public, and non-profit sectors about how to make high-impact 
community investments. And we are fortunate to have some of that 
expertise here with us today.
    I've seen firsthand the important work Enterprise and LISC, 
together with their partners, have done in New Mexico providing 
affordable housing and creating jobs in Catron, Gallup, Las Cruces, and 
in Santo Domingo Pueblo.
    And, Opportunity Zones can help us do more.
    Poverty is stubborn. One in five children grows up in poverty in 
this country, a number that hasn't moved much in a generation.
    In New Mexico, three in ten children grow up in poverty, and in 
some of our counties, close to half of all children live in poverty.
    Growing up poor has lasting impacts on a child's development, 
affecting success in the classroom and educational and employment 
outcomes later in life.
    In addition to expanding proven credits and programs like the 
Earned Income Tax Credit and Head Start, we need new approaches.
    Two-generation models can increase opportunities for families 
living in poverty by simultaneously targeting children and parents with 
programs and supports to boost economic security and improve the health 
and well-being of the whole family.
    Opportunity Zones offer an additional path to spur economic 
development.
    Before the new zones are implemented, we have time to think through 
some guardrails that can help ensure the intent of the legislation is 
realized.
    We should monitor how much money is flowing where, who is making 
the investments, and what kinds of projects are being funded.
    We need the engaged involvement of community development experts. 
The folks who do this important work every day see this as a tool that 
can be harnessed for social good, and their sustained engagement is 
critical.
    We need to make sure that rural and tribal communities are getting 
a fair share of the funds. The designation of zones so far splits about 
75/25 urban to rural.
    That's a good start. But the key questions will be: are investments 
getting made in rural zones and on tribal lands, and what more can we 
do to assist these communities in building a pipeline of projects that 
get funded.
    Ideally, I would like to see data collected on job creation, 
poverty reduction, and new business formation across zones. These 
numbers would tell us a great deal about the impacts of the newly 
created zones.
    Ultimately, transparency wins the day. Knowing more allows us to do 
more.
    Closely monitoring implementation and establishing appropriate 
guardrails either through rules or additional action by Congress can go 
a long way toward ensuring that Opportunity Zones bring new economic 
activity to communities who desperately need it.
    This is big opportunity, let's seize it. Thank you to the witnesses 
for being here today. I look forward to your testimony.
                               __________
    Statement of Hon. Tim Scott, a U.S. Senator from South Carolina
    I want to first thank the Joint Economic Committee, Chairman 
Paulsen, and Ranking Member Heinrich for holding this important 
hearing.
    Every day, we are seeing more and more great news about the current 
economic expansion in America, a trend that is breaking records and 
exciting economists and citizens alike.
    This is currently the third-longest economic expansion since 1854, 
and on track to be the second-longest on record.
    After a strong jobs report was released for the month of April, we 
should not only celebrate all of the exciting components of our booming 
economy, but also look forward to the continuation of this growth and 
success.
    The Tax Cuts and Jobs Act, historic tax reform passed last 
December, gets much of the credit for the most recent economic upswing, 
and for good reason!
    Unemployment continues to fall, and at 3.9 percent it is currently 
the lowest national unemployment rate we've seen in 17 years.
    African-American unemployment is also at its lowest since 1972--
more than four decades.
    Similarly, job expansion continues, with more than 800,000 new jobs 
added since the passage of tax reform and more than one million 
Americans of working age re-entering the work force in the past two 
years.
    In response, wages are on the rise as well.
    Because of tax reform, millions of Americans have seen increased 
benefits, higher wages, and bonuses.
    We also got the news that of manufacturers surveyed by the National 
Association of Manufacturers, 72 percect say they plan to increase 
employee wages or benefits, and 77 percent plan to hire more workers.
    This is in addition to the Small Business Optimism Index reaching 
record highs, and the number of small businesses reporting poor sales 
falling to a near record low.
    And the best part--this is before many components of the tax reform 
package have truly kicked in.
    This past Tax Day marked the last Tax Day under the old system--
which means great news for American families next year.
    And even as we speak today, the Treasury Department is working on 
the rules for a critical component of tax reform--the creation of 
Opportunity Zones.
    Today, 52 million Americans live in distressed communities . . . 
and it is clear that, despite the economic gains we have made, too many 
families are still being left behind.
    I grew up in one of those neighborhoods--places where hope has been 
lost, and too many think the lights have been turned off on a brighter 
future.
    If we aren't finding ways to give these smart, hardworking folks a 
hand up, we simply aren't doing our job.
    That's why I first introduced my Investing In Opportunity Act, or 
IIOA, and why I worked hard to ensure it was included in the Tax Cuts 
and Jobs Act.
    The IIOA creates thousands of Opportunity Zones across the country.
    What does that mean exactly?
    Well, we have trillions of dollars in unrealized capital gains in 
this country--trillions of dollars sitting dormant.
    By changing the way capital gains are treated, encouraging long-
term investments in distressed communities in exchange for a break on 
capital gains taxes, we believe we will see hundreds of billions of 
private dollars invested in low-income communities.
    Governors from across the country have now submitted their states 
choices for Opportunity Zones, and the Treasury Department is working 
its way through the submissions for approval.
    This highlights a key component of these zones--they are led from 
the ground up. Communities, mayors and governors worked hard to 
identify where these dollars could do the most good--not someone here 
in Washington.
    And, unlike other related attempts in the past to help these 
communities, Opportunity Zones don't create a new government 
bureaucracy, and we won't be tying more hands with red tape
    The promise of these zones is immense, without question.
    Small business owners and entrepreneurs will have more access to 
capital to make their dreams come true. Charter schools could find more 
funding at their fingertips to ensure every child has access to a 
quality education. Construction and infrastructure projects that have 
been waiting for years could finally be started and completed.
    With the promise of long-term investment, those dollars will be 
staying in these communities, helping dreams come true
    That's what we should be thinking about every day here in Congress 
. . . what can we do to restore hope in communities where it's been 
lost, and ensure the American Dream is accessible for every family 
across the Nation?
    Opportunity Zones have so much potential, and I look forward to 
Treasury finishing the rules over the course of the next few months and 
getting this ball truly rolling.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


  Response from Mr. Lettieri to Questions for the Record Submitted by 
                           Senator Klobuchar
                        rural economic recovery
    In Minnesota, a large number of the communities eligible for 
designation as Opportunity Zones are rural. While the rural economy is 
doing well in many parts of Minnesota, I am still seeing challenges, 
and I know that other states are seeing these challenges too. You have 
noted that rural areas may require greater engagement from the public 
and philanthropic sectors to benefit from the Opportunity Zone 
designation.

      How can we best foster this engagement between the public 
sector, the philanthropic sector, and private investors and 
entrepreneurs in rural areas?

    Fostering engagement between sectors begins with strong State and 
local leadership. State and local leaders were heavily engaged in the 
designation process for Opportunity Zones; now the task is to ensure 
the momentum carries forward into the next phase as communities seek to 
recruit new investment. In particular, mayors and governors in rural 
areas must lead by engaging a broad set of stakeholders and 
institutions to develop the strategies necessary for long-term success 
in their Opportunity Zones. In the end, Opportunity Zones are only a 
tool, and they will be most effective in communities that root them 
into broader economic development strategies.
    There are also insights and complementary resources to glean from 
other Federal programs that can help inform and expand the impact of 
Opportunity Zone strategies in rural America, including:

      State Small Business Credit Initiative (SSBCI) venture 
capital program;
      Department of Commerce's Office of Innovation and 
Entrepreneurship, Regional Innovation Strategies program;
      USDA Rural Business Investment and Rural Business 
Development programs; and
      Small Business Administration Small Business Innovation 
Research (SBIR), Small Business Technology Transfer (STTR), and Small 
Business Investment Company (SBIC) programs.

    See also the new MOU between the U.S. Department of Agriculture and 
the Small Business Administration on collaboration for investment in 
rural areas: www.usda.gov/media/press-releases/2018/04/04/usda-and-sba-
join-forces-help-businesses-rural-america.

      What else can be done to foster economic development in 
rural areas?

    Rural America needs greater support for entrepreneurs in order to 
reverse the sharp decline in new business formation seen in rural 
communities since the Great Recession. As a background resource, I 
would like to refer you to testimony I gave before the Senate Committee 
on Small Business and Entrepreneurship on April 26, 2017, on the 
subject of rural entrepreneurship, which touched on a number of issues 
that are relevant in the context of Opportunity Zones (available here: 
http://eig.org/news/u-s-senate-committee-small-business-
entrepreneurship-hearing-challenges-opportunities-running-small-
business-rural-america-2.
    More generally, I would put forward three categories to help 
organize how we think about fostering rural economic development: 
capacity, connectivity, and capital.
    Capacity: Improving a local economy requires growing the capacity 
of the local labor force, and that means investing in education and 
training services to make sure businesses have access to sufficient 
talent pools that can drive productivity and innovation. The 
educational attainment gap between metropolitan and non-metropolitan 
areas is growing. It will be very hard to establish new and lasting 
foundations of rural prosperity in a human capital-driven economy if 
this trend continues.
    Connectivity: Any local economy's success depends greatly on 
connectivity and integration into the broader regional and national 
economies. Rural areas often face additional challenges due to their 
physical isolation as well as a lack of basic ingredients, such as 
high-speed internet connectivity, that many places take for granted. 
Thus, Federal policies that promote connectivity to markets, capital, 
and expertise can play an important role in boosting the viability of 
businesses in rural areas.
    Capital: Opportunity Zones focus specifically on unlocking equity 
investment, which is needed to drive development of high-growth 
potential companies that can help bring the innovation, 
diversification, and expansions needed to strengthen rural communities. 
However, a strong, diversified economy requires more than one type of 
financing, and rural areas in particular may struggle to access the 
full capital continuum amid declines in community banking and other 
financial sector developments. Programs that help fund and support 
expansion of financing by community banks and credit unions, such as 
the Community Development Financial Institutions (CDFIs) program, can 
help to fill that gap and ensure more local businesses have access to 
the capital that they need, helping to fortify local economies.
                    support services and clustering
    Entrepreneurs and economists frequently talk about the 
``clustering'' effect that leads start-up ventures to concentrate in 
particular geographic areas such as Silicon Valley. These favored 
locations then develop the social capital and support services 
necessary to sustain an entrepreneurial economy.

      How might the Opportunity Zone program catalyze the 
development of an entrepreneurial economy in rural areas that currently 
lack such support services?

    While we should be very careful not to define success in rural 
economies--particularly low-income rural communities--against the 
performance of innovation clusters like Silicon Valley, some common 
lessons do apply. One lesson is that there is no substitute for the 
benefits of a diverse and entrepreneurial local economy. Opportunity 
Zones can help support rural entrepreneurs in a variety of ways, 
including by attracting equity investors directly into new and growing 
businesses, as well as by financing rural business incubators and 
accelerators that help provide essential support infrastructure in a 
local startup ecosystem. Here again, mayors and governors can play a 
key role in providing complementary resources and incentives to help 
bolster the impact of the Federal incentive in achieving entrepreneur-
friendly local outcomes.

      Since the Opportunity Zone program allows prospective 
investors to invest in any zone across the Nation without regard to the 
investor's physical location, are you concerned that the zones may 
compete against each other in such a way that the rural zones are left 
behind?

    Places are already in competition for capital and talent, and such 
competition need not be a race to the bottom. Instead, Opportunity 
Zones can provide a healthy catalyst to improve local economic 
development policies and practices, and spur innovative approaches that 
put local assets to better use. In spite of national headwinds, many of 
the most dynamic and prosperous places in the country are, in fact, 
rural communities, and they provide important lessons for rural 
Opportunity Zones.
    Opportunity Zones are a powerful tool that can mobilize a new array 
of investors and a much larger scale of investment in low-income 
communities nationwide, but the incentive alone is not a substitute for 
a sound local economic development strategy.
                               __________
   Response from Ms. Ludwig to Questions for the Record Submitted by 
                           Senator Klobuchar
                     low-income housing tax credit
    The Low-Income Housing Tax Credit (LIHTC, pronounced Lie-Tech) is 
our Nation's primary method of subsidizing the creation of low-income 
housing and new accounts for the approximately 90% of all affordable 
rental housing created in the United States today. This past March, I 
was pleased to join my colleagues in leading a successful 12.5 percent 
expansion of the credit for the next four years. Since the Opportunity 
Zones program targets capital gains taxes, it seems likely that real 
estate will be a natural investment target for program investors. In 
Minnesota, we've seen recent investment concentrated on luxury units 
rather than middle-class or affordable housing.

      How do you expect the new Opportunity Zones program to 
interact with the LIHTC program? Do you believe that the two programs 
will help support and reinforce each other? Is there a possibility of 
interference between the two programs?

    Senator Klobuchar, thank you for this question. Enterprise 
Community Partners has strong expertise in aggregating private capital 
and deploying it through programs like the Low-Income Housing Tax 
Credit, and we applaud the 12.5% expansion of the Housing Credit 
through 2021. We are eager to realize the potential of Opportunity 
Zones to complement proven public-private partnerships like LIHTC.
    While we are still waiting for additional Opportunity Zones 
guidance from Treasury and the IRS with clarification about the types 
of investments that are eligible, it appears that all rental real 
estate, including residential real estate, located in Opportunity Zones 
will constitute an eligible investment.
    Given that the lower corporate tax rate from the Tax Cuts and Jobs 
Act of 2017 has reduced investor demand for the Housing Credit and 
therefore equity in the LIHTC market, Opportunity Zone investments 
offer the potential to fill a gap in critical equity investments in 
LIHTC projects.
    We believe that Opportunity Zones should be able to pair with the 
Housing Credit. The 15-year Housing Credit compliance period lines up 
well with the long-term incentives of Opportunity Zones.
    In particular, Opportunity Zones present potential to fill in the 
``missing middle'' of the financing stack for middle-income housing 
(60-120% of Area Mean Income). This offers critical opportunity for 
those who do not qualify for low-income housing but still struggle to 
find housing they can afford, such as our Nation's teachers, 
firefighters, and nurses.

      What can be done to ensure that investment income in 
Opportunity Zones helps address rather than exacerbate the affordable 
housing crisis?

    Thank you for this question. Through our work on Opportunity Zones 
with governors, mayors, investors, and community-based organizations, 
Enterprise Community Partners has seen that, while communities are 
excited about this potential catalyst for economic development, they 
are also concerned that private investment could unintentionally 
displace the very residents and businesses that the new tax incentive 
is intended to support. This is why we recommend that Treasury have 
guidelines to ensure that investments in designated Opportunity Zones 
offer sustained benefit to all members of the community.
    Specifically, we recommend requiring that Opportunity Funds report 
to Treasury on transaction-level data and that this information be made 
available to the public. These steps will promote the transparency of 
Opportunity Fund activities, drive accountability, and allow for 
assessment of whether the tax benefit is meeting its intended policy 
goal of bolstering inclusive, sustainable economic growth.
    Secondly, we believe that Treasury should use its statutory 
authority from Congress to issue regulations to prevent abuse. We 
suggest that the definition of abuse include investments that adversely 
impact low-income residents, including investments that result in net 
loss of affordable homes.
    These guardrails for the implementation of Opportunity Zones will 
help ensure that current residents and businesses benefit from 
resulting economic growth.
    For our part, Enterprise is committed to working with State and 
local governments to implement policies and programs suited to local 
needs. Drawing on our 35 years of expertise in affordable housing and 
community development finance, we are exploring Opportunity Fund models 
that would foster inclusive, sustainable economic growth and prosperity 
for residents and businesses. Any fund we create would incorporate best 
practices drawn from our work--including investments that create 
opportunity by developing and preserving affordable housing, creating 
living-wage jobs, supporting minority- and women-owned businesses, and 
expanding transportation and infrastructure.
                               __________
   Response from Ms. Ludwig to Questions for the Record Submitted by 
                            Senator Heinrich
    1) What do the designations tell us so far? Which indicators tell 
us whether governors chose areas that would most benefit from 
Opportunity Zones? For New Mexico, how do the economic conditions of 
designated Opportunity Zones compare to conditions in eligible, non-
designated tracts?
    Senator Heinrich, thank you for these questions.
            What do the designations tell us so far?
    There has been tremendous variety in the places that have been 
designated as Opportunity Zones. Some Opportunity Zones are 
characterized by large populations of impoverished residents, while 
others have a broader mix of income levels. There are Opportunity Zones 
that continue to struggle with long-term economic challenges, and 
others that are already on an upward economic trajectory. Some have 
sizable anchor institutions--hospitals, universities, etc.--while 
others do not. There are Opportunity Zones in cities of every shape and 
size, in suburbs, rural areas and tribal communities. They exist in 
communities with all levels of local government capacity, leadership 
and formal business community organization.
    Some of this variation is undoubtedly due to the differences in 
strategies that states chose to employ in nominating zones. But one 
common tendency we observed among many states was the need to make 
nominations reflect a variety of place types. In some cases, this meant 
ensuring that each county had at least one Opportunity Zone in it. In 
others, this meant ensuring that rural or tribal communities were 
represented in the process. Whatever the strategy, the design of the 
Opportunity Zones nomination process led many (if not most) states to 
adopt an approach favoring variety rather than focusing on a single 
metric or dimension (e.g., choosing the tracts with the largest number 
of Opportunity Fund-eligible investments in them).
    We do not yet know how this variety may affect Opportunity Fund 
portfolios. Certainly, it means there will be a wide variety of 
possibilities for investments, including investment strategies favoring 
real estate improvements and those that focus on business investments. 
But the variety of places that have been designated as Opportunity 
Zones and the uncertainty surrounding Opportunity Fund investment 
profiles will pose a significant challenge for states and larger 
municipalities who hope to align Opportunity Fund investments with 
local business and community development needs. It will also be 
difficult to identify coherent strategies that apply across Opportunity 
Zones in larger jurisdictions--strategies such as coordinated public 
investments or State/local tax incentives that work well in one 
Opportunity Zone may not work well in another with different 
conditions. Instead, the needs and investment opportunities in each 
Opportunity Zone will need to be considered and understood. Given the 
nearly 8,800 Opportunity Zones that have been designated, this will 
take time and resources that states and municipalities may not be 
prepared or able to invest on the timescale needed to coordinate well 
with Opportunity Fund investments.
    We continue to analyze these census tracts to better inform an 
investment strategy, but it is clear that there will not be a one-size-
fits-all approach to Opportunity Zones.
            Which indicators tell us whether governors chose areas that 
                    would most benefit from Opportunity Zones?
    The answer to this question will be highly dependent on the types 
of investments Opportunity Funds end up pursuing and in which 
Opportunity Zones these investments are made. In general, we believe 
that access to affordable housing, access to jobs that pay a living 
wage, sufficient transportation options, and good health and education 
outcomes are critical metrics that indicate the overall well-being of a 
community. The potential benefits of Opportunity Fund investments will 
depend on the alignment of the investments with the needs in the 
Opportunity Zone. There is no single set of metrics that will tell us 
which Opportunity Zones stand to benefit the most from general 
investments.
    For example, Opportunity Funds emphasizing affordable housing 
creation and preservation may provide the greatest benefit in areas 
where real estate values are already high or expected to grow. 
Opportunity Funds focusing on real estate investments may provide 
greater benefits to local residents through returns to increased land 
and home values in Opportunity Zones with greater homeownership rates. 
Investment portfolios focusing on businesses expected to create 
additional jobs may provide greater benefits where there are more 
residents with relevant skills or where robust workforce development 
programs exist.
    However, we expect much of the activity in Opportunity Zones will 
be influenced by:
        1) the ability of individual businesses and landowners to 
        create attractive investment options; and
        2) the leadership and institutional capacities at the 
        neighborhood and local government levels to ensure that 
        Opportunity Fund investments are aligning with other 
        neighborhood and community development strategies.
    This means in part that the degree of benefit to Opportunity Zone 
communities will be driven by factors that are not reflected in the 
demographic and economic indicators we typically use to assess 
communities.
            For New Mexico, how do the economic conditions of 
                    designated Opportunity Zones compare to conditions 
                    in eligible, non-designated tracts?
    Overall, eligible Low-Income Communities in New Mexico that were 
not designated as Opportunity Zones have similar characteristics to the 
Low-Income Communities that were designated as Opportunity Zones. They 
have similar racial profiles, similar home values, and similar levels 
of renter cost burden. That said, there are a few key differences 
between designated tracts and ``eligible but not designated'' tracts in 
New Mexico:
        1. New Mexico Opportunity zones have higher poverty rates than 
        eligible but not designated Low-Income Communities (23% and 
        16%, respectively).
        2. New Mexico Opportunity Zones have lower median family 
        incomes than eligible but not designated Low-Income Communities 
        ($56,000 and $62,000, respectively).
        3. The designation strategy in New Mexico favored tracts with 
        more jobs--the average New Mexico Opportunity Zone has more 
        than 2.5 times the number of jobs of the average eligible but 
        not designated Low-Income Community.
        4. New Mexico Opportunity Zones have a greater presence of 
        affordable housing--51% of New Mexico Opportunity Zones contain 
        Federally supported affordable housing units compared to 42% of 
        eligible but not designated tracts.
        5. A greater-than-proportional share of tracts that intersect 
        with tribal areas were designated (29% of designated tracts 
        intersect compared to 21% of eligible but not designated Low-
        Income Communities).
    2) What Federal, State, or local policies would ensure there is a 
pipeline of startups and small businesses ready to take advantage of 
equity capital investments incentivized under this provision?
    State, regional and local governments can play a pivotal role in 
steering investments towards the Opportunity Zones and projects that 
best serve the community's identified needs. For example, governments 
may consider:
        1. Establishing a government-run Opportunity Fund. Many 
        governments have existing ties with the financial sector and 
        are ready to engage investors and fund managers. Moreover, some 
        cabinet level agencies are well-adept at managing large funds 
        and financing the types of projects that may qualify for 
        Opportunity Fund investments. This demonstrated experience and 
        track record of responsible financing and underwriting could 
        attract additional investors.
        2. Developing and implementing a process for collecting and 
        preparing a project pipeline for potential investors. Having a 
        portfolio of projects to share with investors demonstrates an 
        ability to deploy capital quickly--a key component of the tax 
        incentive. For example, the State's Housing Finance Agency or 
        Labor Department would be well-positioned to develop a pipeline 
        of affordable housing developments or new business start-ups, 
        respectively, that are ripe for investment and meet investment 
        requirements.
        3. Engaging philanthropy, the health care sector, and other key 
        stakeholders who can provide additional financial incentives to 
        de-risk Opportunity Fund investments. Governments can also play 
        a key role in mitigating risk to investors by contributing or 
        matching their own dollars, for example, through existing 
        programs that provide small business loans or gap financing for 
        affordable housing.
        4. Evaluating the tax code, including any State-level capital 
        gains tax, to determine whether any additional tax relief can 
        be provided to attract investors while also steering 
        Opportunity Fund investments toward identified projects. For 
        example, a State could provide additional tax relief to 
        investors who invest in a government-run Opportunity Fund or 
        whose dollars are used to finance affordable housing.
    Because Opportunity Zones are a market-driven tax incentive it will 
be critical for State and local governments to incent investment in 
Opportunity Zones that may struggle to attract private capital.
    At this point, however, the biggest barrier for this capital is the 
uncertainty around eligible investments. Treasury should provide 
clarifying guidance and examples around investing in rental real 
estate, health care facilities, schools, infrastructure, and other 
critical resources. This will provide the needed certainty for State 
and local governments to recruit specific investments best-suited for 
their population and economy.
                               __________
   Response from Mr. Jones to Questions for the Record Submitted by 
                         Representative Maloney
    1) Managers of Opportunity Zone funds presumably would want to 
maximize profits. What financial incentives do they have to invest in 
affordable housing vs. other real estate investments? What would be 
needed to steer Opportunity Zone funds to affordable housing?
    The Opportunity Zone program provides an incentive for private 
investors to invest funds in businesses and real estate projects in 
low-income communities, without distinction as to the type of business 
or project funded. As with any investment, we anticipate that investors 
in Opportunity Funds will evaluate businesses, housing, and economic 
development projects based on return and product type, with a typical 
investor looking for a higher rate of return and a standard level of 
risk.
    We think that the Opportunity Zone incentive can be an effective 
tool for financing affordable housing, particularly housing targeting 
families between 60-100% of median income in high-cost markets. Many of 
these families are considered ``severely rent burdened''--paying more 
than 50% of their income in rent each month. We think the program can 
attract investors for this needed middle income housing.
    It may also be possible to use Opportunity Zone incentives to 
target housing serving families lower down on the income ladder, but 
this will likely involve twinning the Opportunity Zone incentives with 
other Federal, State or local resources, or further tax abatement. 
Investing in affordable housing for families making less than 60% of 
area median income is most frequently done through the Low Income 
Housing Tax Credit, which has been a highly successful program. Current 
LIHTC investments are generally held by investors (frequently regulated 
financial institutions that are seeking Community Reinvestment Act 
considerations) who may or may not be able to utilize Opportunity Zone 
tax benefits. However, with the added benefits of the deferral and 
reduction in capital gains taxes, it is expected that a LIHTC project 
twinned with Opportunity Zone benefits may provide higher yields and 
bring some new investors to the table.
    To attract investors in Opportunity Zone projects that are targeted 
to affordable housing, particularly for those on the lower end of the 
income spectrum, there will need to be additional sources of subsidized 
capital. We believe that it will be incumbent upon states and 
localities to incentivize these investments. For example, states and 
localities could design companion incentives (tax or otherwise) to 
enhance the returns on affordable housing located in Opportunity Zones, 
thereby attracting more Opportunity Funds to invest in affordable 
housing. States and localities can also steer resources such as HOME 
funds and CDBG funds to projects in Opportunity Zones that meet certain 
affordability requirements, or provide tax abatement in return for 
targeting units for 80% and below AMI families.
    2) Are you concerned that the Opportunity Zone program could lead 
to increased gentrification? What kind of oversight is needed to make 
sure that Opportunity Zone spending benefits residents of the targeted 
census tracts?
    The way the Opportunity Zone incentive is structured, investors 
will get a modest return through deferral of initial capital gains 
taxes, but a potentially huge return with the forgiveness of any 
additional capital gains that result upon exit from the Opportunity 
Fund investment. This means investors may be incentivized to seek out 
the deals with the highest long-term yields, which may not be the 
projects that bring about the most impact for the community or its 
residents. And without any Federal or State agencies overseeing the 
selection of projects and investment plans, there is no direction to 
necessarily pursue higher-impact community development investments. One 
could therefore see this program leading to displacement of lower-
income community residents, either because the neighborhoods themselves 
get ``overheated'' with investment capital, thereby lowering the supply 
of ``naturally occurring affordable housing'' or because the structure 
of the incentive rewards investors seeking the higher yields offered by 
market rate or even luxury housing.
    We believe that the Treasury/IRS could play a more significant role 
in oversight of the program, in order to mitigate against these kinds 
of outcomes. We believe it was the intent of Congress to at a minimum 
create a safeguard against potentially bad actors abusing the program, 
but also to potentially offer Treasury a mechanism for screening 
Opportunity Funds in an even more substantive manner; as evidenced by 
the fact that the TCJA's accompanying Conference Report stated that 
``the certification process for a qualified opportunity fund will be 
done in a manner similar to the process for allocating the new markets 
tax credit.''
    New Markets Tax Credits are allocated through an annual competitive 
application process, one which helps ensure that the most qualified 
entities are provided with credit allocations, and that the scarce 
credits are directed to the highest and best uses. While it is not 
feasible to hold competitions among Opportunity Funds in the manner 
that entities apply for NMTCs, Treasury could certainly consider 
employing some of the best practices from its NMTC review process into 
its Opportunity Fund certification review. For example, through the 
NMTC allocation process, entities are encouraged to commit to more 
rigorous outcomes as a condition of receiving an allocation, and then 
are held to these commitments as part of their allocation agreement. 
These include, among others:

      targeting investments in areas of severe economic 
distress;
      offering below-market rates and terms to their borrowers;
      investing more than the minimally required 85% of the 
NMTC investment proceeds into their low-income communities;
      financing (if applicable) affordable housing; and
      making ``innovative'' investments, including investments 
in small businesses.

    In addition to these provisions, which become a compliance 
requirement of the NMTC allocation agreements, applicants also receive 
higher scores for being able to demonstrate a likelihood of achieving 
significant community impacts, such as: creating high-quality jobs; 
providing goods and services to low-income community residents; 
financing minority-owned businesses; and ensuring environmentally 
sustainable outcomes.
    As noted previously, LISC does not suggest imposing a competitive 
scoring and selection process on the certification of Opportunity 
Funds. This would be an unwise use of resources (both Federal and 
private sector) and would cause considerable delays in program 
implementation at a time when Treasury needs to move quickly to publish 
regulations and guidance to provide investors with certainty that their 
investments in Opportunity Funds will qualify for the tax incentive.
    However, as provided for in the Conference Report, we do think it 
would be appropriate for the Treasury Department to require Opportunity 
Funds to identify, at the time of certification, at least one outcome 
from a list of desirable outcomes that they will commit to achieving 
with their investments. The desirable outcomes could be drawn from the 
NMTC selection items above, or could be broadened to include additional 
items that may be more relevant to the intentions of the Opportunity 
Zone program, for example, providing working capital and equipment 
capital to start-up businesses. Applicants would indicate their chosen 
outcomes through self-certifications at the time of the certification 
application, which could then be reviewed during a compliance audit 
after the investments have been made.
                               __________
   Response from Mr. Jones to Questions for the Record Submitted by 
                           Senator Klobuchar
                          broadband deployment
    The promise of the Opportunity Zone program is to bring private 
investment capital to areas of our country that have been left behind. 
For this laudable goal to be achieved, these distressed areas need to 
have the basic infrastructure in place to support private economic 
activity. I believe broadband deployment is the infrastructure 
challenge of our generation. As co-chair of the Senate Broadband Caucus 
[with Senators Capito, King, Heinrich, and Boozman], I believe we must 
also provide direct Federal investments in rural communities to close 
the digital divide.

      How will improving access to rural broadband foster 
economic opportunity in Opportunity Zones?

    LISC believes that access to broadband is critical to the economic 
health of rural communities, particularly those that have struggled 
with disinvestment and have been, or are likely to be, designated as 
Opportunity Zones. Businesses everywhere today need access to the 
internet to reach customers and sell their products. It is increasingly 
difficult, if not impossible, to attract businesses, retain businesses, 
or grow businesses in areas that lack access to fast and reliable 
internet services.
    There is clearly a digital divide when it comes to rural versus 
urban communities. According to the Federal Communications Commission, 
approximately 98% of the U.S. population living in urban areas has 
access to both high-speed terrestrial and mobile services, as compared 
to just under 69% of the U.S. population in rural communities, and just 
under 64% of the population living on tribal lands. This translates 
into about 14.5 million families in rural and tribal communities that 
do not have access to both broadband services.
    Communities that do not have broadband services are certainly going 
to have trouble competing for investments from the private sector, both 
in isolation and with incentives such as Opportunity Zones. Having 
access to broadband is critical for the long-term success of businesses 
operating in rural communities. In a recent webinar hosted by the 
National Telecommunications and Information Administration (NTIA) of 
the Department of Commerce, Lionel ``Bo'' Beaulieu, Director of Purdue 
University's Center for Regional Development, cited research studies 
that have shown a positive relationship between rural broadband 
adoption and:

      economic growth (Steinberg, 2009);
      attraction of new firms (Kim and Orazem, 2017);
      retention and growth of existing small businesses 
(Shideler and Badasyan, 2012);
      increase in annual value-added sales (Canzian, Poy, and 
Schuller, 2015);
      higher individual incomes (Whitacre, Gellardo, and 
Stover, 2014); and
      higher number of entrepreneurs (Conley and Whitacre, 
2016).

    The broader health of communities can also be improved with access 
to broadband. The NTIA reports that ``going digital'' can save schools 
as much as $600 per year per student on textbooks, that ``telehealth'' 
reduces hospital admissions by 25% and decreases length of stays by 
59%, and that access to broadband increases home values by 3.1%.
    In short, it is very hard for communities to succeed in attracting 
private sector investments, and in reaching their full economic and 
quality of life potential, without access to reliable broadband 
internet.

      What role does Federal support play in promoting 
broadband deployment in rural areas?

    As is often the case with major infrastructure investments, the 
Federal Government plays a critical role in promoting broadband 
deployment in rural areas. There are many Federal programs that 
directly finance the development of broadband infrastructure, including 
multi-billion dollar programs administered by the United States 
Department of Agriculture (e.g., Telecommunications Infrastructure 
Loans and Loan Guarantees; Rural Broadband Access Loans and Loan 
Guarantees) and the Federal Communications Commission (e.g., Connect 
America Fund). Equally as important, there are numerous other programs 
at these and other agencies that focus not only on infrastructure, but 
also on adoption, digital literacy, public access, research and 
planning, as well as some targeting specific sectors (health, 
libraries, schools, etc.). It is important that the Federal Government 
continue to strongly support and robustly fund all of these initiatives 
to ensure that rural communities can compete for investments and 
attract high-quality jobs.
                         workforce development
    Even if investment capital were to flow into distressed 
communities, businesses and new ventures would not be able to expand or 
start without the ability to find workers. I hear from companies 
throughout Minnesota that report they can't fill job openings, 
especially for more technically demanding trades and professions. We've 
got to address this skills gap by strengthening our technical education 
and by helping young women and men decide early to pursue training that 
will equip them for jobs in the manufacturing sector.

      How should we do that? What role should the Federal 
Government play?

    LISC believes that, first and foremost, the Federal Government can 
join the private sector in encouraging students (and their parents), as 
well as members of the workforce, to pursue jobs and careers in the 
manufacturing and advanced manufacturing sectors. We need to increase 
demand for these jobs. The Federal Government definitely has a role to 
play here.
    LISC is acutely aware of the difficulties that businesses and 
certain industries have in recruiting talent to fill positions. 
Research indicates that 53% of all jobs in today's labor market are 
middle skilled, and only 43% of U.S. workers have the appropriate 
training to fill the available positions--according to the National 
Skills Coalition; in Minnesota those numbers are 50% and 45%, 
respectively. This is a formidable challenge, but it is not 
insurmountable. As outlined below, we believe that there are several 
things that the Federal Government can do to help address this issue.
Fully Fund Workforce Innovation and Opportunity Act (WIOA) Programs
    Congress should adequately fund our nation's workforce system by 
robustly funding the WIOA Title I programs, including increasing the 
funding for WIOA adult education grants and the WIOA career and 
technical education State grants. These essential programs and funding 
streams form an infrastructure that provides people with fundamental 
career services, education and training, and supports necessary to get 
good jobs and stay employed. WIOA programs are inextricably linked to 
the skills conversation because they are often the systemic points of 
entry for the talent we are interested in routing to middle-skill, 
living-wage careers.
Support Policies That Incorporate Proven Innovations in Contextualized 
        Skills Training
    The Federal Government should find ways to incentivize states and 
localities to adopt innovative approaches to contextualized skills 
training for the hard-to-serve/hard-to-employ population. Skills gaps 
often prevent unemployed or underemployed residents from accessing 
training and credentialing programs that can lead to living-wage jobs.
    At LISC, we believe that a solution lies in bundled/integrated 
career service delivery and matching employers in need of workers with 
a specific skill set to job seekers who have been trained in those 
skills. A little more than a decade ago, LISC began supporting 
Financial Opportunity Centers (FOCs)--which provide employment and 
career counseling alongside one-on-one financial coaching and education 
and low-cost financial products that help build credit, savings, and 
assets. They also connect clients with income supports like food and 
utility assistance. The cornerstone of the FOC model is providing these 
services in an integrated way, rather than as stand-alone services, and 
with a long-term commitment to helping clients reach their goals.
    Our Bridges to Career Opportunities (BCO) model builds upon the FOC 
model and helps individuals ramp up foundational literacy and math 
skills, get technical training, and pursue certifications for a 
particular industry while receiving supports like financial coaching to 
set long-term goals and help manage expenses during training. These 
programs connect clients to ``middle skills'' jobs with a career 
pathway, and help local employers staff up with employees who can get 
the job done. By blending this training with financial coaching, 
clients take the reins of their economic and professional lives.
    Our FOC and our BCO work was scaled and replicated thanks to a 
Social Innovation Fund (SIF) award from the Corporation for National 
and Community Service (CNCS). Although SIF funding has been eliminated 
in the past two fiscal years, we encourage Congress to find ways to 
fund pilots that support data-driven innovation in the ever-evolving 
workforce sector. Additionally, we encourage Congress to adopt policies 
that create a workforce system that supports vulnerable populations as 
they attempt to upskill. Robustly funding the SNAP Employment and 
Training Program in the Farm Bill--with an emphasis on innovation as 
opposed to dated work requirements--and updating the Temporary 
Assistance for Needy Families Program (TANF) support contextualized 
skills training is highly encouraged.
Align Career Pathways and Postsecondary Educational Systems
    We need to more thoughtfully align our workers and community 
college students to the business sector. There are a few legislative 
proposals that support this alignment. The Perkins Career and Technical 
Education Act should be reauthorized and updated so that secondary and 
postsecondary Career and Technical Education (CTE) programs support 
local workforce development strategies. If adopted, the JOBS Act (S. 
206) would allow Federal workers to use Federal Pell grants to pursue 
industry-specific credentials. Legislative action in these two areas 
are just the beginning of potential opportunities to support new 
approaches in postsecondary education. Additionally, we encourage you 
to look at the proposals outlined in the National Skills Coalitions 
2018 Skills for Good Jobs Agenda. There is significant overlap with 
LISC's emerging policy agenda in the workforce space, and the National 
Skills Coalition is a trusted partner and ally in this work.
Support Policies That Fund and Incentivize Apprenticeships
    Contextualized skills training should also be supported via 
apprenticeships. LISC is a participant in the Campaign to Invest in 
America's Workforce (CIAW) coalition and would like to echo CIAW's 
recommendation to increase the $95 million investment in apprenticeship 
programs at the Department of Labor. Additionally, there are several 
pending authorization bills that provide a framework and resources for 
incentivizing apprenticeship opportunities:

      The bipartisan PARTNERS Act (H.R. 4115) supports 
partnerships between businesses and other local workforce stakeholders 
to help small- and medium-sized businesses develop and run work-based 
learning programs;
      The BUILDS Act (S. 1599) leverages new funding for 
construction-related projects and requires the Secretary of Labor to 
award grands for promoting industry or sector partnerships to encourage 
industry growth and competitiveness and improve worker training, 
retention, and advancement; and
      The Investing in American Workers Act (S. 2048) would 
incentivize employers to dedicate more resources to worker training. 
This legislation creates a tax credit to benefit employers who 
demonstrate a commitment to upskilling their workers. Employers who 
invest more capital in training in one year than they have in the 
previous three years would be eligible for a tax credit that equals 20% 
of their increased spending.

    These are just a few examples of opportunities to incentivize 
apprenticeships.

      Is there a way to encourage investors in Opportunity 
Zones to invest in workforce training programs that will help the local 
workers?

    While it may be challenging for the Opportunity Zones investments 
themselves to be focused on workforce training programs, given the 
structure of the tax incentive, we do believe that opportunity funds 
may look to invest in businesses that provide training and upskilling 
products and services at competitive rates to enterprises already 
present in, or willing to locate to, an Opportunity Zone. Furthermore, 
we believe that there can be opportunities to align workforce programs 
and incentives with Opportunity Zone investments.
    For example, one such area that may be worth exploring, on the 
Federal level, is aligning Opportunity Zones with the Work Opportunity 
Tax Credit (WOTC). As you know, WOTC is a Federal tax credit available 
to employers for hiring individuals from certain target groups who have 
consistently faced significant barriers to employment. Currently, 
residents living in Empowerment Zones and rural Renewal Communities are 
included in the criteria for WOTC target groups. We should explore 
whether adding residents from Opportunity Zones to the designated 
target groups provides any benefit, and consider revising WOTC to 
incentivize employers to invest in contextualized skills training. 
Similarly, on the local level, we may also want to encourage Workforce 
Investment Boards (WIBs) to align their activities with businesses 
located in, or seeking to locate in, Opportunity Zones.
    In the meantime, LISC is looking for other ways to bring our 
workforce training initiatives into Opportunity Zones. For example, due 
in part to the FOC/BCO funding and capacity-building support that LISC 
has provided to Community Action Duluth, the City of Duluth, and its 
partners, Community Action Duluth and SOAR Career Solutions, were 
recently awarded a $326,216 State of Minnesota Department of Energy and 
Economic Development Pathways to Prosperity grant to fund healthcare 
and construction training to serve low-income people, people of color, 
those with criminal records, and those with disabilities. This work is 
being done with a strong focus on bringing private sector employers to 
the table to help build skills and career opportunities. We are hoping 
to align these kinds of efforts with businesses located in Opportunity 
Zones.
    In Saint Paul, the Port Authority is currently working with the 
East Side Employment Exchange (which includes several of LISC's FOC/BCO 
partners), Metro State University, Saint Paul College, and others on 
workforce development efforts. The Port owns a number of the East Side 
Opportunity Zone properties that are ready for larger employers with 
workforce needs. The Port could potentially play a financing role in 
the development of these opportunities within Opportunity Zones, and 
the philanthropic/corporate funders are seeking to accelerate the 
alignment with workforce investments.
                               __________
   Response from Mr. Jones to Questions for the Record Submitted by 
                            Senator Heinrich
    1.) What can be done to boost capacity in rural communities and on 
tribal lands to help these areas attract investment and realize the 
benefits of Opportunity Zones? Are there strategies for State and local 
governments or community organizations to generate greater deal flow to 
rural and tribal areas?
    A key to boosting capacity in rural communities and on tribal land 
in order to help these areas attract investment and realize the 
benefits of Opportunity Zones is to invest in and support the 
community-based organizations (CBOs) that work in and near Opportunity 
Zones. These CBOs are familiar with the demands of their communities 
and regions and understand where opportunities lie to meet those 
demands. Focused capacity building tools ensure a CBO can drive 
activity and maximize the benefits of an OZ designation.
    At LISC, through its national program Rural LISC, we provide a 
trifecta of capacity building tools to rural CBOs: technical 
assistance, low-cost and patient capital, and targeted grant 
investments to help build capacity within rural communities. LISC's 
approach is to:

      Develop the leadership capacity of rural CBOs to advance 
the work on the ground;
      Work with and through rural CBOs in underinvested 
communities to provide residents with the skills and credentials to 
compete successfully for quality income and wealth opportunities;
      Invest in businesses, housing and other community 
infrastructure to catalyze economic, health, safety and educational 
mobility for individuals and communities;
      Strengthen existing alliances while building new 
collaborations to increase the impact and progress of people and 
places; and
      Drive local, regional and national policy and system 
changes that foster broadly shared prosperity and well-being through 
advocacy, in partnership with rural CBOs.

    A prime example of the power of building rural capacity is evident 
in rural New Mexico. Rural LISC has provided partner organization 
Tierra del Sol Housing Corporation with $383,129 in capacity building 
grants, $220,000 in zero predevelopment financing, and $400,000 in low-
cost loans in recent years. This investment has resulted in 436 
affordable homes built. Tierra del Sol has been able to leverage that 
investment from LISC at a rate of 23:1, securing $23 million in 
additional funds to further their work in New Mexico. Rural CBOs are 
masters at leveraging funding, when provided with opportunity and 
predevelopment financing.
    The role of the Federal Government in supporting capacity building 
programs for CBOs cannot be overstated. Two of the most critical 
programs for this purpose are HUD's Section 4 Capacity Building for 
Community Development and Affordable Housing Program (``Section 4''), 
which includes a rural set aside; and the USDA's Rural Community 
Development Initiative (RCDI). These programs provide funding to 
support the growth and sustainability of non-profit housing and 
community development organizations, and can be used to help rural non-
profits secure the staffing or technical assistance needed to be 
competitive in attracting investments into Opportunity Zones.
    However, as effective as they are, these programs can only satisfy 
a very small portion of the needs of rural non-profit CBOs. State and 
local governments should consider funding capacity building efforts to 
help bridge the gaps of Federal funding. State and local governments 
can also encourage and support greater project generation by directing 
their resources such as CDBG and State housing funds to proposed 
Opportunity Zone projects. Finally, local governments must recognize 
the need and value of investing time and streamlining entitlements for 
opportunity zone deals, to ensure proposed developments are not bogged 
down or lost due to lengthy entitlement processes and extensive 
regulations.
  

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