Revitalizing Cities With Opportunity Zones, With Jonathan Tower

Opportunity Zones have driven over $150 billion in investment into underdeveloped areas, but their future depends on Congressional action.

Jonathan Tower, founder and CEO of Arctaris Impact Investors, joins the show to discuss the next phase of Opportunity Zone policy, the role of public-private partnerships, and the investment strategies that can maximize both impact and returns.

Episode Highlights

  • How expanding the number of designated Opportunity Zones could direct capital to additional underserved areas.
  • Why allowing re-designation of OZ census tracts would ensure that capital flows to areas most in need.
  • How integrating OZs with other federal programs, such as HUD’s affordable housing initiatives, could maximize their effectiveness.
  • Why public-private partnerships have been key to successful OZ projects, aligning private investment with local government priorities.
  • How housing shortages in major cities (like Los Angeles and Baltimore) can be addressed through OZ-driven redevelopment.

Guest: Jonathan Tower, Arctaris Impact Investors

Featured On This Episode

About The Opportunity Zones Podcast

Hosted by OpportunityZones.com 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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Transcript Summary

The Current State of Opportunity Zones

  • Opportunity Zones (OZs) have been one of the most successful federal economic development programs, with over $150 billion in capital deployed.
  • Congress is expected to extend and improve the program, with legislation likely by late 2025.
  • The Opportunity Zone initiative has benefited both urban and rural areas, supporting real estate, infrastructure, and business development.

Jonathan Tower emphasizes that while the program has been effective, there is room for improvement, particularly in expanding designated zones, increasing transparency, and integrating OZs with other federal programs.

Improving and Expanding Opportunity Zones

Tower and his co-author Steve Glickman recently published an article in Governing Magazine advocating for a larger, more effective Opportunity Zone program. Their key proposals include:

  • Doubling the number of OZs to cover more underserved areas, particularly rural communities.
  • Allowing for re-designation of existing zones so that areas that have seen economic success can transition out, while new areas can be added.
  • Increasing transparency and reporting requirements to ensure accountability and showcase the program’s impact.
  • Integrating OZs with other federal programs, such as affordable housing and infrastructure initiatives from the Department of Housing and Urban Development (HUD).

These reforms aim to extend the program’s reach while ensuring that federal tax incentives continue driving meaningful community development.

The Potential for Permanency

Many industry leaders, including Tower, advocate for making Opportunity Zones a permanent part of the tax code. This would:

  • Allow capital to flow without concern for arbitrary deadlines.
  • Align OZ designations with new census data every 10 years, ensuring that capital reaches the most in-need communities.
  • Create predictability for investors and developers, leading to more long-term projects.

Congress must weigh the cost to taxpayers against the benefits of a rolling program that adapts to economic shifts over time.

Public-Private Partnerships and OZ Investments

A core theme of the discussion is how OZs encourage collaboration between governments, private investors, and local communities.

Tower highlights successful public-private partnerships, such as:

  • Baltimore, MD – Conversion of an abandoned high-rise hotel into workforce housing, in alignment with the city’s economic development strategy.
  • Los Angeles, CA – A transit-oriented housing development leased by the city for five years, ensuring stability and affordability.

These projects illustrate how OZs can align investor incentives with community needs, particularly in housing, broadband, and infrastructure.

Making Deals Work: Stacking Incentives

Opportunity Zones alone may not be enough to make a deal financially viable. Many successful projects combine OZ benefits with:

  • New Markets Tax Credits
  • State and local tax abatements
  • Brownfield redevelopment credits
  • Government-backed low-interest financing

By layering incentives, developers reduce risk while delivering high-impact projects.

The Role of Bonus Depreciation

Arctaris Impact Investors places a strong emphasis on tax benefits beyond OZs, particularly bonus depreciation. This strategy helps investors:

  • Offset taxable gains from 2026 deferrals.
  • Reduce upfront costs in real estate and broadband infrastructure projects.
  • Increase the overall return profile of OZ investments.

This focus on tax efficiency is a key factor in structuring attractive investment opportunities.

What Arctaris Looks for in Deals

For sponsors and developers seeking investment, Arctaris typically looks for:

  • Investment sizes between $10M – $50M.
  • Preferred equity positions with downside protection.
  • Projects that align with community development goals, particularly in workforce housing and infrastructure.
  • Experienced operators with a track record of execution.

Key markets of interest currently include Hartford, Pittsburgh, Cleveland, Rhode Island, and Washington State.

Conclusion

  • Opportunity Zones have been transformative, but improving and extending the program will unlock even greater potential.
  • Public-private partnerships ensure long-term, community-driven investment strategies.
  • Investors can enhance their returns through stacked incentives and tax-efficient strategies.
  • Future legislation will determine whether OZs become a permanent feature of the tax code.