Opportunity Zones Could be a Mixed Bag in Gallup

By Vince Gallagher Native American Initiative Program Associate, Enterprise Community Partners

In April 2018, Governor Martinez nominated 63 census tracts in New Mexico to become Qualified Opportunity Zones, including Gallup.

The idea is to encourage direct investment to lowerincome areas across the state and country—now designated as Opportunity Zones—by offering a new federal tax incentive. Opportunity Zones became law as part of the massive tax bill that President Trump signed into law at the end of 2017.

Investors bringing capital to Opportunity Zones can receive a series of tax benefits, with greater benefits to those who keep their money longer in these low-income census tracts. Opportunity Funds—the vehicle that aggregates and deploys investor capital—could help address many of the challenges facing Gallup, including high rates of poverty, alcoholism, homelessness, and violence.

The legislation authorizing Opportunity Zones allows investors to work on a broad range of activities, such as affordable housing, healthcare facilities, and healthy food options—all of which would benefit residents of Gallup and the surrounding communities.

But this incentive is only that: an incentive for investors to support much-needed development. Investors are not required to bring capital to any of the country’s 8,700 Opportunity Zones. That leaves communities like Gallup facing a serious threat: continued disinvestment.

Opportunity Zones have a role to play in rural communities but should not be treated as a panacea for decades of disinvestment. Gallup will be competing for private investments against thousands of other census tracts that, in many cases, will offer investors faster and more attractive returns. In fact, early indications are that significant amounts of Opportunity Fund activity will be focused on the coasts.

Areas like Gallup clearly face major challenges to create

a thriving community. Decades of underinvestment in rural America has left basic infrastructure challenges— such as a lack of broadband and water/sewage systems— that make many investors reluctant. Fully addressing these challenges will require concerted strategies and funding from federal, state, and local governments, as well as private stakeholders.

States have been considering how to attract Opportunity Fund investments to areas that are not in major cities. For example, Washington state has introduced a bill to create a state-level tax credit that incents investment in rural Opportunity Zones. Elected officials could consider a similar effort to incent investment in Gallup and similar communities across New Mexico. and other funding sources can be used to catalyze further investment and guarantee an attractive rate of return, which helps mitigate investor uncertainty about investing in low-income communities or places that are new to them.

To make Opportunity Zones work for places like Gallup, we also need to understand exactly what is happening with these investments across the country. Currently, the law has no requirement that Opportunity Funds report on their investment activity. As a result, stakeholders may not be able to evaluate the impact of private investment dollars on local residents and businesses. Is the community broadly benefitting, for example, or are the gains mainly flowing to a small group?

Elected officials can also target additional resources for Gallup. Providing technical assistance and other federal, state, and local capacity building resources will be critical to lay the necessary groundwork for successful economic development that can then build on itself.

Philanthropy has an integral role to play as well. Grants

Gallup can leverage its designation as an Opportunity Zone and attract investment in new developments that support the community and residents. But doing so will require stakeholders—including community groups, residents, investors, elected officials and others—to work together on local investment strategies that align with Gallup’s unique needs.

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