The Next Steps For Opportunity Zones, With Ja’Ron Smith

Can Opportunity Zones be re-tooled to help create additional social impact for years to come?

Ja’Ron Smith, chief advocacy officer at the Opportunity Funds Association, joins the show to discuss efforts to reauthorize the Opportunity Zones legislation, grow the coalition, and implement new incentives to boost community development.

Episode Highlights

  • Ja’Ron Smith’s Capitol Hill career and time spent in the Trump White House, including his involvement in crafting the Opportunity Zones legislation and creating the White House Opportunity & Revitalization Council.
  • The importance of reauthorizing and expanding the Opportunity Zones legislation to continue supporting economic development in underserved areas.
  • How the Opportunity Funds Association aims o get the legislation reauthorized while also growing its coalition by involving more stakeholders and promoting Opportunity Zones.
  • The importance of engaging local leaders and community members in leveraging Opportunity Zones for economic growth and revitalization.
  • How the Opportunity Funds Association seeks to relaunch and expand its mission later this year.

Guest: Ja’Ron Smith, Opportunity Funds Association

About The Opportunity Zones Podcast

Hosted by OpportunityDb founder Jimmy Atkinson, The Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in the Opportunity Zones industry.

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Show Transcript

Jimmy: Welcome to the “Opportunity Zones Podcast.” I’m Jimmy Atkinson. My guest today is Ja’Ron Smith, as the deputy director of the Office of American Innovation under President Donald Trump. Ja’Ron helped establish the White House Opportunity and Revitalization Council. And recently, Ja’Ron was named chief advocacy officer for the Opportunity Funds Association. He joins us today from Washington, D.C. Ja’Ron, it’s great to see you. Thanks for taking some time to come on the program. How are you doing?

Ja’Ron: I’m doing okay. Thanks for having me, Jimmy.

Jimmy: Good. So, it’s great to hear from our friends at the Opportunity Funds Association. A lot of my audience may be familiar with that organization already because its CEO, Shay Hawkins, has been featured on my platform numerous times in the past. He’s spoken on a lot of my different podcasts and webinars. You’ve been recently added to the team at the OFA. I wanna ask you about the Opportunity Funds Association, and its mission, the organization in particular. But first, I wanna get some background on you, Ja’Ron. You were formerly, like Shay Hawkins, a staffer under Senator Tim Scott, and then you went to work at the Trump White House. But, you know, enough from me. I wanna hear it from you. Can you give us a little bit about your background, how you got to where you are today in your career?

Ja’Ron: Sure. So, I worked 10 years on Capitol Hill, seven and a half years in House Republican leadership, and two and a half years for Senator Tim Scott. Then I did some advocacy work on justice reform and education, with Marriage for Prosperity, before being hired as the director for urban revitalization policy for the Trump administration. I then moved on to be special assistant for domestic policy. I also played a role with the White House, on lege affairs team, as a special assistant for lege affairs. And ultimately, I ended my service as a co-role with being deputy director for the Domestic Policy Council, as well as deputy director for the Office of American Innovation. And so, I served all four years in the Trump administration, and as you mentioned, prior to that, served as Senator Scott’s first senior legislative assistant for banking and taxes in the U.S. Senate, once he became senator. So, really been blessed with the wealth of different experiences. When I worked in the House, I did get a opportunity to work with Jim Jordan when he was Republican Study Committee chair, as well as representative and leader Scalise when he was Republican Study Committee chair. I also spent time working for Vice President Pence when he was conference chair. So, that’s some of the notable names that comes out of House leadership. But my experience goes back to 2002, working for Congressman J.C. Watts.

Jimmy: That’s great. So, a lot of experience working for different Republican elected officials over the years, and in the Trump White House a few years ago. I wanna ask you about your time with Senator Tim Scott. Senator Tim Scott is, a lot of my audience knows, I’m sure, one of the biggest advocates of Opportunity Zones. He was an original co-sponsor of the Investing in Opportunity Act, which eventually was packaged into Trump’s Tax Cuts and Jobs Act, and it became Opportunity Zones as we know them today. What was your involvement with Opportunity Zones, and creating legislation around Opportunity Zones early on in Senator Scott’s office, during that period prior to Trump taking the White House and then passing that tax package?

Ja’Ron: Sure. So, I think in the early iterations around Opportunity Zones, I was doing the initial research with Senator Scott, trying to figure out what type of federal tool that could be created to incentivize dollars going into low-income census tracts throughout the country. Senator Scott, having had vast experience working on the state and local level, looked at different tools, such as like a TIF, which allows individuals to raise money for the revitalizing, and maybe close some gap funding locally. And so, we initially were looking at what a federal TIF would look like, and investigated current programs, like the New Market Tax Credit. And with that being said, Senator Scott invited me to kind of help him figure out how do we get there. When I was invited to join his team, it was to work on the Opportunity Agenda. So, the initial name, Opportunity Zones, came out of my initial working with him, because we were working on the Opportunity Agenda. But later he was able to kind of work with the Economic Innovation Group and Shay Hawkins to kind of work through the details of what that federal incentive looks like. And once it was launched, when I was away from Senator Scott’s office, I had the opportunity to work directly with him, to help get the tax parameter within the Tax Cuts and Jobs Act, and so that’s when I got really active with the Senator’s office in helping work with Treasury Secretary Mnuchin, Gary Cohn, to ensure that it was a part of the Tax Cuts and Jobs Act.

Jimmy: Perfect. And it eventually did become part of the Tax Cuts and Jobs Act, and the rest is history, as they say, and Opportunity Zones have been with us now since December of 2017. Of course, the designations were made the following summer, and we’re well on our way now, pretty mature marketplace. A lot of work still to do with Opportunity Zones. And the fact that it is expiring at the end of 2026 is cause for some concern for the industry and for investors within Opportunity Zones. We’ll talk about that process, of it winding down, and possibly getting extended, a little bit later in the program today, but you moved on from your time with Senator Tim Scott into the Trump White House. And shortly after Opportunity Zones were enacted, some time later, President Trump initiated an executive order that created a new office to help promote Opportunity Zones, the White House Opportunity and Revitalization Council. We’ve had their former director, Scott Turner, on the show in the past. That council no longer exists, unfortunately. Biden did not renew it when he took office a few years back. But what was your involvement with the White House Opportunity and Revitalization Council? And do you think it may ever come back at some point in the future?

Ja’Ron: So I, when we passed the law, I knew that in order to maximize the legislation, it would be helpful to create leadership around a government strategy to leverage the zones in a way that can help deal with other issues with revitalizing those census tracts, mostly dealing with community development. I also knew that the economic development piece could also be helped if certain federal tools were leveraged inside those zones. And so the goal was to, one, prioritize Opportunity Zones, by showing that the federal government was also committed to ensuring that these low-income census tracts had all the tools they need in order to be able to take the incentive to inspire or encourage private sector investment. But part of that is also showing some public sector investment. And so, with the Revitalization Council, we were able to kind of leverage 17 different agencies, that focused on 4 areas, entrepreneurship, economic development, education and workforce, and safe communities. As you can imagine, in certain census tracts, they don’t get capital investment because of public safety issues. So, being able to have public safety dollars to deal with safety issues, to kind of clear the way for capital development, is extremely important.

And then, also, once you redevelop a community, you may need work support, access to child care, access to things that will help train individuals for the jobs that may be attracted through Opportunity Zones. And so, working with the Department of Education, working with the Department of Labor, to focus resources there, was extremely important. And so that showed the federal commitment, but it also allowed for us to encourage state and local governments to also stand on the same side as the federal government, to have a united government strategy. And so, you had the five partnership that I used to discuss. You have the private sector, which is Opportunity Zone Funds, corporations, nonprofits, churches. You have the federal, state and local government, and you have the individuals that are impacted by the revitalization of those four different partners. And luckily, a number of local mayors and governors worked alongside the Trump administration to make this robust. And this is where you’ve seen the most robust investment in those communities, when we had all those partners kind of working alongside each other. Case in point is looking at the state of Alabama, we were kind of working with Governor Ivey, and we were able to work directly with Randall Woodfin in the city of Birmingham, and with that three-way partnership, that it really opened up the capital partnership from the private sector in a unique way.

And we were also hoping that we can kind of leverage that council, and Treasury, to also report out findings from what worked and what didn’t work. Because the unfortunate part about Opportunity Zones is that the reporting requirements that were in the original legislation, which we would report out job growth, home ownership, or affordable housing, or small business growth, wasn’t in the base legislation. And so, we tried to use our executive power to try to report out that micro data, so that we can inspire more investment as it relates to those kind of revitalization efforts. And so, I wish that work would have continued. That was very bipartisan in essence. So, we had the Trump administration working with a lot of urban governors and urban mayors and rural governors. I’m sorry, urban mayors and rural mayors, as well as governors. And so, all of that showed something very unique. And that also opened up what I think is the $50 billion of investment that we’re seeing in Opportunity Zones.

Jimmy: Absolutely. That federal commitment, early on, from the Trump administration I thought was huge for Opportunity Zones, to put it in the limelight a little bit more. It assured investors and developers that the weight of federal government was behind the program. President Joe Biden, when he was first campaigning to be president, in the summer and fall of 2020, he did have a little bit of information about Opportunity Zones on his website. He viewed them favorably, as I’m sure he knew that a lot of Democratic mayors and governors around the country viewed Opportunity Zones favorably. It is broadly supported in bipartisan fashion. Unfortunately, since the Biden administration took the White House in November of 2020, I guess they were inaugurated in January 2021, of course, Opportunity Zones has not been a priority for his administration. I don’t think there’s been any mention of Opportunity Zones. It’s just kind of puttered along, but not without that same level of support that the previous administration had shown it.

I wanna shift gears, and talk about your time now, coming into this new role at the Opportunity Funds Association. And as I mentioned a few moments ago, of course, Shay Hawkins, the CEO of the Opportunity Funds Association, which is a big trade organization for Qualified Opportunity Funds and Opportunity Zone investments all around the country, he’s been a big presence on my platform here the past few years, so probably a lot of my audience is already familiar with the OFA, but for anyone new to the audience, maybe new to Opportunity Zones, hearing about OFA or the Opportunity Funds Association for the first time, Ja’Ron, can you tell me what is the OFA, exactly? What is the Opportunity Funds Association? Who are its members, and what is its mission?

Ja’Ron: Sure. So, Opportunity Funds Association is a network of Qualified Opportunity Zone Funds. As you can imagine, just to kind of talk about the legislation, you have to be a certified Opportunity Zone Fund in order to qualify for the tax incentives that Opportunity Zones, through the tax bill, creates. And those actual funds have become part of a network that Shay Hawkins has created, which, traditionally, originally was just focused on reauthorizing the legislation. As we go into September, we’re looking to grow the organization, because we know that the work of the Opportunity Funds Network is beyond just the funds itself. In order to kind of revitalize, and take advantage of the incentive, it also takes the work of working with municipalities locally, as well as communities that are part of those Opportunity Zones that have been designated.

And so, what we hope to do is grow our coalition beyond just the funds itself, but with the communities to which the fund networks will invest. And so, that would allow for us to kind of work with municipalities, work with nonprofits, work with community leaders, as well as small businesses, to really kind of light fire to why Opportunity Zones need to be not only reauthorized, but even expanded. And so, our coalition is going to do a number of convenings throughout the country to kind of get more people at the table who have been positively impacted by the legislation, and figuring out how we can take this tool to do more work. Because, after the pandemic, many communities have been even further left behind, and are looking at ways that they can revitalize those communities where they are currently situated, and help take them into the 21st century. And we can do that by leveraging this incentive, growing it, and bringing more organizations into the network.

Jimmy: So, really, I’m hearing a two-pronged approach, or a two-pronged mission for the Opportunity Funds Association. One, get the legislation reauthorized, and then possibly, that’ll get done through the current legislation that’s been pending for a while, the Opportunity Zones Transparency Extension and Improvement Act. And then the other prong is to grow the coalition, bring in more stakeholders, and help promote Opportunity Zones, to have it leverage these communities all over the country in more efficient fashion. Can you talk to me a little bit about that bill I just mentioned a moment ago, the OZTEIA, or the Opportunity Zones Transparency Extension and Improvement Act? I’ve covered it on the program a few times in the past. It was originally introduced into both houses of Congress, I think two or three years ago now, and was most recently reintroduced into this current session of Congress, just on the House side, I believe it was last fall, last September, if I recall correctly. What are your thoughts on that piece of legislation? And what do you think is most likely to happen with it when it may or may not get passed?

Ja’Ron: So, I think that the House leadership, Representative Kelly, who has a great story to tell about Erie, Pennsylvania, and how they were able to use the incentive to revitalize downtown Erie… And what we’re still needing in the legislation is a North Star, for what does good look like? And as I mentioned earlier, the original legislation was stripped of the reporting requirements that originally were a part of the Invest in Opportunity Act. Those reporting requirements created a North Star for the program, for what does good look like. What type of jobs have been created from Opportunity Zone Funds? How many small businesses have been created from Opportunity Zone Funds? How many affordable housing opportunities have been created from Opportunity Zone Funds? What the legislation does at its core is return those reporting requirements back into the legislation, to help create that North Star, so that we can get the right type of investments into these low-income census tracts.

One of the black eyes from the legislation was many wouldn’t report out that areas that weren’t really low-income areas, such as college towns, were designated Opportunity Zones, or that investments that were already gonna happen, like building hotels or high-rises, which didn’t necessarily revitalize communities, were taken advantage of through the legislation. This new legislation helps create those assurances that we’re getting the right type of investments that’s gonna be not only mutually beneficial for investors, but it’s also gonna mutually benefit those communities that are looking to be revitalized. Other things that the legislation is doing is giving a little more flexibility to rural communities, who, some were left out, and weren’t designated. It’s trying to strengthen what communities are designated as low-income census tracts, so that individuals can’t game the system, and we can make sure that the right communities are getting revitalized.

But outside of the initial legislation, the coalition is looking at ways to grow by working with organizations such as community development financial institutions. These organizations have a North Star with doing these type of investments that revitalize communities. And if we can allow for some of those organizations to be qualified businesses, meaning they can be eligible for Opportunity Zone investment, that can also be a way to increase lending capacity inside these Opportunity Zones. We’ve also looked at ways of creating CRA requirement, Community Reinvestment Act requirements, that would allow for banks that participate in Opportunity Zone strategies to get credit through CRA. That’s gonna incent, again, more lending, and more capital investment from banking institutions, inside Opportunity Zones. But there’s also the ability to, in the current legislation, to invest money into smaller communities, I think, like, a billion dollars of technical assistant funding, to help small communities be able to kind of learn the technicalities around the legislation, without having to spend their money on consultants, that this should be a program that can be leveraged by all communities, and it shouldn’t be about big communities versus small communities. And so, a billion dollars in technical assistance would allow those smaller communities to get the technical infrastructure that they need in order to participate in the program.

But I think the biggest thing about us launching in September is making sure that all communities, all parts of a Opportunity Zone network, benefit from this new tool. Rather, you’re a municipality, a non-profit, let’s figure out how we all can kind of leverage this tool in a way that’s gonna lift all ships, and create mutual benefit for all low-income communities.

Jimmy: Well said. And I hope it does come to fruition. You’re right about that $1 billion technical assistance funding. I’m just reading now on my screen here from the initial summary that came out from Congress when they first introduced this extension bill a few years back. I’ll just read this portion here. “This section establishes a $1 billion state and community dynamism fund to provide the state’s territories and District of Columbia with technical assistance, capacity building, and financing support to drive capital to projects and businesses in underserved communities.” So, it’s essentially, it’s just layering on an extra $1 billion in federal funding to help with additional community development in underserved areas.

Ja’Ron, I wanted to revisit the Opportunity Zones Transparency Extension Improvement Act just for a couple more minutes here. I think we kind of talked about a little bit two different things here. One is, let’s talk about getting Opportunity Zones extended, number one. That goes into this Transparency Extension and Improvement Act. But also, two is, let’s go beyond what this current legislation on the table is gonna do, and let’s create what some may term Opportunity Zones 2.0. So, let me put Opportunity Zones 2.0 aside for a moment. We’ll revisit it, but getting back to the legislation on the table, again, as I mentioned earlier, it was first introduced several years back. And the part of the legislation that extends the program, what it does is it rewrites the tax code such that the deferral date gets pushed back by two years, from December 31, 2026 to December 31, 2028. So, it’s a two-year extension. My question for you, Ja’Ron, is is two years not enough, given that it’s taken as long as it has to get to the point where we still don’t have Opportunity Zones tax legislation that has extended that program? Can the industry afford for only a two-year extension that may come, I don’t know when, maybe sometime in the next 12 to 18 months? That kicks the can down the road to 2028, but are we going to be able to get in more extension legislation prior to the end of 2028, or should we try to go for longer than two years? What’s the priority of policymakers on Capitol Hill, and what’s the priority of the Opportunity Funds Association, in terms of that two-year period? Is that enough, or would you like to go for more than that?

Ja’Ron: We certainly would wanna go for more than that. I think that the thinking earlier was that we can maybe kind of get something done as Congress, but I think a longer duration is certainly needed. I know that communities around the country would wanna leverage it for a longer duration. There’s also thoughts about kind of bringing back some of the step-ups, you know, the 5% step-up and the 10% step-up, if we were able to extend it. But these all are ultimately things that I think needs to be debated through Congress, in a bipartisan manner, because I think one thing that’s extremely important is that we wanna kind of use this legislation to create a nonpartisan coalition, because this is not about politics. This is about how do we kind of make sure that all communities are a part of the dynamic nature of America, and so many communities have been left behind for 40 or 50 years because they have not been economically dynamic, and this legislation is proven to work. And how can we take this legislation in a way to make it more workable for more communities, which is why that billion dollars in technical assistance is extremely important. Before we had that billion dollars, the White House Opportunity and Revitalization Council was spread thin. We didn’t have enough Scott Turners to go around the country to articulate the nuances of this legislation. With that billion dollars of technical assistance, that would be a lightning path for so many communities. So, we certainly would need some time to kind of open up the capital markets, and let this legislation be workable for all communities.

Jimmy: And going beyond that, then, building this idea of Opportunity Zones 2.0, which takes the basic concept of Opportunity Zones, but then expands it. I mean, one idea that you brought up a moment ago was make it possible for community development financial institutions, CDFIs, to be qualified as Qualified Opportunity Zone Businesses, and be eligible to receive funding through Qualified Opportunity Funds. What other ideas do you have to help reignite and grow the coalition, and create this OZ 2.0, I’m calling it, that kind of takes Opportunity Zones and makes it bigger and better, and ends up creating, catalyzing more economic development, more private capital flow into these low-income communities all over the country?

Ja’Ron: So, I mentioned a little bit about CRA credit for banking entities, which would be huge, would help in more capital, you know, the capital infrastructure that currently exists, and getting them very excited. We had banks like PNC that were very involved in Opportunity Zone, building in Philadelphia and Cleveland, Ohio, and participating in a lot of projects. And if you want more banking entities like them to participate, allowing for them to get CRA requirement, or CRA credit, would galvanize all types of banking entities to do more work in the Opportunity Zone space.

But one other piece that’s extremely important is allowing for fund-of-fund flexibility, which would allow for churning within the investment. The duration for investment doesn’t allow for, within the fund, to be some buying and selling, that would actually free up capital. And so, one thing that we’ve been pushing for, almost since the beginning of the legislation, was to have this fund network work like the current private equity model, which allows for churning, where you can kind of buy and sell in the short run. And that robust capital nature would allow for more private equity investment in business capital. And so, this would expand the capital nature of Opportunity Zones to be beyond just real estate, but allow more robust capital structure around business startups and growing businesses.

And so, with that being said, the original thought process around Opportunity Zones was being able to kind of build new capital infrastructure that just wasn’t just focused in Silicon Valley, Los Angeles, and Boston, but to kind of create new capital for small businesses and the low-income census tracts. And so, with that churning model being opened up, that’s gonna also unleash new capital infrastructure into these zones, that can create jobs, and create growing of small businesses, and do things that will kind of step into the 21st century as we’re trying to bring more communities to kind of thinking about ideas to galvanize AI and technology, and kind of the new, what they call the new manufacturing network that we’re trying to bring back to America. Which is another big thing for Senator Scott. He’s trying to figure out how we can leverage the incentive to incentivize more foreign investment here, or kind of galvanize more American manufacturing here, home, in some of those low-income census tracts. And so these are kind of the outside-the-box thinking that I think Congress is gonna try to work through those details, to figure out how it works. The biggest important part of this is gonna be how do we pay for it, because dollars are limited here in Washington. And so, whatever we invest in, we wanna make sure that it’s gonna pay back dividends, so that we don’t continue to put our country in debt.

Jimmy: Yeah, that would be a huge thing to pull off if we can accomplish it. Hopefully, we look back on this period of time 20 or 50 years from now, and we see it as just the very beginning for Opportunity Zones, instead of where we are right now, where we’re kind of in the thick of it. It looks like Opportunity Zones are ending in a little less than two and a half years, unfortunately, but hopefully, we look back later and see that wow, this was just the beginning. Look how big this economic development policy has become.

So, Ja’Ron, Opportunity Zones have been around now for a little over six years. It was July of 2018 when the zones were finally designated and certified by the Treasury Department. So, they’ve been around with us now a little more than six years. We’re recording this in July of 2024. A lot of good has come out of Opportunity Zones. Possibly $100 billion or more of equity investment has flowed into Opportunity Zones at this point, according to some estimations. What in your mind, though, is the biggest misconception of Opportunity Zones after these six years? What do people still not understand about OZs that you wish that they would?

Ja’Ron: I just don’t think people are hearing enough stories about how these… Well, first of all, many people would argue that the $100 billion didn’t exist, and that the data analytics came out in the Biden administration. And so, we have a Republican initiative, a Republican initiative that was passed in the Tax Cut and Jobs Act, but which was always bipartisan. And then the reporting of it came out in a Democratic administration, which speaks to that $100 billion. But most Americans don’t know that that $100 billion went into these communities, and you were able to see new affordable housing, some small business growth, as well as some job creation. I think that’s the story that needs to be told, which is why we have launched, or relaunching, on the Opportunity Funds Association, to tell that story, to do these convenings around the country, to talk about the impact, to bring the stakeholders who see the promise of Opportunity Zones to the light, so that we can work, as a country, to do our best to revitalize communities that have been historically left behind. And so that’s the work of the Opportunity Fund Association, and we look forward to kind of continuing to work with you to talk about why the program’s important, and why we need to reauthorize it.

Jimmy: Well, Ja’Ron, it’s been a pleasure speaking with you today. Thanks for giving me and my audience your insights into Opportunity Zones, and the work that the OFA is doing. Before we go, tell us a little bit more about OFA. Who should join the Opportunity Funds Association, and where can our audience go to learn more about it?

Ja’Ron: Sure. So, we certainly want all the private equity organizations out there that look at Opportunity Zones as a opportunity to kind of really get involved and revitalize the low-income communities. And so, that’s everything from the private equity funds all the way to developers, as well as to small business owners who wanna kind of leverage this incentive to grow their business. And so, that’s one kind of delegation. Another delegation is municipalities, municipalities all across the country, that wanna kind of continue to use this tool to help revitalize the low-income parts of their communities. And then lastly, local leaders, local leaders who wanna kind of see change in their community, that wanna kind of figure out how do we create entrepreneurship, you know, wealth-building, as well as, you know, affordability back in our communities, so that we can kind of create that robust community that everyone always thought America was the land of opportunity. We wanna make that the land of opportunity for everyone. And so, that almost covers the whole gambit of individuals who care about America, and also the forgotten communities. And so, we think that building out this network will ensure that we create the right partnerships within the Opportunity Zones, so that we can create mutual benefit for everyone.

Jimmy: And if anyone in my audience fits into any of those buckets, and they are interested in learning more about joining, what’s the best way for them to learn more, to get in touch with you, or to request more information?

Ja’Ron: So, our website is zonefunds.org. That’s gonna be updated over the next couple months, and so be on the lookout for that. But in the meantime, you can always reach out to me at [email protected].

Jimmy: Perfect. That’s [email protected], or zonefunds.org, the official website of the Opportunity Funds Association. Of course, for my listeners and viewers out there today, I will, as always, have show notes available for today’s episode on our website, at opportunitydb.com/podcast. I’ll have links there to all of the resources that Ja’Ron and I discussed on today’s show. And also, please be sure to subscribe to us on YouTube, or your favorite podcast listening platform, to always get the latest episodes. Ja’Ron, it’s been a pleasure. Thank you so much for joining me today. Really appreciate it.

Ja’Ron: Thanks for having me, Jimmy.