Opportunity Zone Magazine Volume 1, Issue 3 - Page 57
OPPORTUNITY ZONES AND ECONOMIC IMPACT: A PRACTICAL FUND APPROACH
It’s vital that QOFs use,
collect, and share data on
the economic impact of their
investments. This will gauge
the success of the fund against
the intent of the tax policy
and the engagement of the
sets of investors. The QOFs will typically be professionally
managed; they could share the results of their analysis and
ongoing investment reporting with the crowdfunding investors
who may not have access to professional management. The
QOF could also help subsidize the cost of the crowdfunding
raise in order to foster community engagement through
investment by local residents.
MEASUREMENT AND REPORTING OF ECONOMIC IMPACT
It’s vital that QOFs use, collect, and share data on the economic
impact of their investments. This will gauge the success of the
fund against the intent of the tax policy and the engagement
of the community. The good news on measurement and
reporting is that the wheel has already been invented.
INVESTMENT LEVEL MEASUREMENT
The Urban Institute has drafted a Community Impact
Scorecard to assess the impact of each OZ investment project
by answering a series of detailed questions in 7 topic areas:
community impact, jobs, businesses, housing, environment,
services, and transportation. These categories are weighted
against one another based on the community-identified
priorities. The questions in the scorecard cover the job
creations and economic development goals outlined above.
The Community Impact Scorecard is still in draft status
and may be likely be refined and improved over time. This
scorecard is a vital part of our due diligence process and
applied to each specific investment because one, it provides
a standardized measure that can be compared across the large
number of OZ projects that we consider and two, it has the
flexibility to incorporate each the OZ community’s relative
priorities into their objectives.
FUND LEVEL REPORTING
With the attention paid to community engagement and
measuring impact during investment due diligence, fund-level
reporting becomes a relatively simple aggregation process.
Here, you can use the OZ Reporting Framework developed by
the U.S. Impact Investing Alliance and the Beeck Center. 19
The scorecard exercise on the individual investment provide
much of the information needed in the Fund Report. The
intended impact section of the Fund Report can come
directly from the investment scorecard. For multi-asset QOFs,
summary measures by scorecard topic can also be prepared.
Similarly, information is readily available to be summarized
in the community engagement section of the Fund Report.
The measures on economic impact and the information on
community engagement can then be combined with the
overall mission statement and investment thesis of the fund to
complete the Fund Report.
Individual Community Impact Scorecards and aggregate
Fund Report should be monitored and updated on a regular
frequency, e.g. annually. The QOF should monitor ongoing
progress in relation to the objectives and adjust its strategy and
protocol to help achieve those objectives. The Fund Report
can then be made available to QOF investors and other
Economic impact in OZs is a direct reflection of job creation
and the community-specific objectives related to economic
development. Through community engagement and
streamlined project assessment – and the assistance of QOFs
– investments in OZs will result in successful, sustainable, and
positive economic impact for years to come.
Congratulations Leighanne Scott on
Being Named a
Top 25 Opportunity Zone
Leighanne Scott, Esq.
Practice Group Leader, State and Local Tax
(202) 862-5072 | [email protected]le.com