Standing on a corner in the Milo-Grogan neighborhood, Jack Kakura rattles off commute times鈥攕even to 10 minutes to downtown, 10 minutes to the airport, maybe 15 to Easton.
Kukura, who directs investments for Ohio Capital Corporation for Housing, stands in front of two properties his organization developed a number of years ago and set aside as affordable housing for 30 years.
鈥淚 mean this Milo Grogan area has a lot going for it, just based on pure location," Kukura says.
The neighborhood is part of an 鈥攁 new program allowing investors to avoid paying capital gains taxes by putting their money into disadvantaged areas. States could propose up to 25 percent of their low income census tracts as Opportunity Zones.
In Ohio, 320 zones were designated. One of them is Franklin County鈥檚 23rd.
Running along the northern edge of I-670, blocks of homes sit cheek by jowl with industrial parks crawling with semis. Another freeway, I-71, cuts a vertical swath through the tract鈥檚 western side. The most noticeable feature is a massive black water tower rising like a toadstool among the houses.
But if you ask Kukura, he sees untapped potential.
鈥淚 mean it鈥檚 been kind of forgotten about, I think, for investment for a period of time," Kukura says. "But I mean, I think, pure location鈥攖his area has got a lot going for it."
Former U.S. Rep. Pat Tiberi left Congress early this year, but on his way out the door, he helped shepherd the Opportunity Zones provision into the federal tax overhaul.
鈥淵ou can invest in an opportunity zone in almost anything you want, and if you are successful, and you do make money and you stay there for the long term鈥�10 years鈥攜ou鈥檙e not paying federal taxes for 10 years,鈥� Tiberi explains.
That tax benefit applies to capital gains, the profit an investor makes on their original investment. The idea is to drive private investors to places experiencing generational poverty and encourage them to park their money there long-term.
As an example, Tiberi points to food deserts.
鈥淲hen you talk to people in the industry鈥攊n the grocery store industry鈥攖hey will say they can鈥檛 make money in an area or the risk to reward again is just too great,鈥� Tiberi says. 鈥淎nd so this might provide the oomph, with everything else being equal, that, hey, you know, what we鈥檙e willing to take a risk because of the fact that if we do make money we鈥檙e not going to pay taxes.鈥�
Among the Opportunity Zones in Columbus are areas in Olde Towne East, Whitehall, Franklin Park, Franklinton, the Hilltop, Linden, and Riverside, but also The Ohio State University.
Kukura is optimistic the designation will drive more money to affordable housing investments, but he admits the emphasis on capital gains could make fundraising more challenging. The banks or foundations he usually turns to don鈥檛 have a ton of capital gains. Rather, it mostly affects wealthy individuals.
鈥淚t鈥檚 really a matter of trying to figure out how to marry those high net worth individuals who are investing, with those banks that are investing for tax credits in affordable housing,鈥� Kukura says. 鈥淎nd right now it seems the programs aren鈥檛 really marrying up that well next to each other.鈥�
One way groups like Kukura鈥檚 might attract investors is through opportunity funds鈥攖hink mutual funds, but made up of a selection of investments in an opportunity zone.
For Kukura鈥檚 organization, that might mean different properties, but for the Economic and Community Development Institute (ECDI), the focus would be small businesses. President Steve Fireman shows off their Food Fort鈥攁 large commercial kitchen space they use as a business incubator.
鈥淐hocolate confectionaries, a kimchi maker, we have several caterers,鈥� Fireman says. 鈥淲e have some of our bigger food truck members who use the space to prep their food.鈥�
Many of the businesses use it as a kind of home base鈥攈eading out to other parts of the city to sell their food. And although ECDI is based in Milo-Grogan's Opportunity Zone, the microloans it provides stretch across the state.
Still, one of their members, Lisa Gutierrez from Dos Hermanos Taco Truck, says the additional focus will be good for the area.
鈥淭here鈥檚 a lot of businesses hidden back here, and I think there鈥檚 a lot of opportunity here,鈥� Gutierrez says. 鈥淧eople are very motivated to start their own small business, but they need an incubator situation like this to get information. So this being nestled right here on this side of town and in this community, I think, benefits everybody.鈥�
More important for ECDI, the private funding opportunity zones generate won鈥檛 come with the additional requirements typical of federal dollars. Fireman admits there will be growing pains, but long term, he believes the program will be beneficial for opportunity zones.
鈥淧eople who are investing can think of the investment like they鈥檙e creating their own little social enterprise investment in communities around them,鈥� he says. 鈥淏ecause everybody lives fairly close to one unless you live way, way, way out in the suburbs.鈥�
Federal officials certified 44 Opportunity Zones in Columbus last month, along with hundreds of others around Ohio. They join 17 other states in the initiative, with more on the way.
鈥淚 think people just need to be patient, and eventually it will work and it will be a great program,鈥� Fireman says.
