Standing on a corner in the Milo-Grogan neighborhood, Jack Kakura rattles off commute times—seven 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.
“I mean this Milo Grogan area has a lot going for it, just based on pure location," Kukura says.
The neighborhood is part of an Opportunity Zone—a 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’s 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’s 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.
“I mean it’s been kind of forgotten about, I think, for investment for a period of time," Kukura says. "But I mean, I think, pure location—this 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.
“You 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—10 years—you’re not paying federal taxes for 10 years,” 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.
“When you talk to people in the industry—in the grocery store industry—they will say they can’t make money in an area or the risk to reward again is just too great,” Tiberi says. “And so this might provide the oomph, with everything else being equal, that, hey, you know, what we’re willing to take a risk because of the fact that if we do make money we’re not going to pay taxes.”
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’t have a ton of capital gains. Rather, it mostly affects wealthy individuals.
“It’s 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,” Kukura says. “And right now it seems the programs aren’t really marrying up that well next to each other.”
One way groups like Kukura’s might attract investors is through opportunity funds—think mutual funds, but made up of a selection of investments in an opportunity zone.
For Kukura’s 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—a large commercial kitchen space they use as a business incubator.
“Chocolate confectionaries, a kimchi maker, we have several caterers,” Fireman says. “We have some of our bigger food truck members who use the space to prep their food.”
Many of the businesses use it as a kind of home base—heading 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.
“There’s a lot of businesses hidden back here, and I think there’s a lot of opportunity here,” Gutierrez says. “People 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.”
More important for ECDI, the private funding opportunity zones generate won’t 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.
“People who are investing can think of the investment like they’re creating their own little social enterprise investment in communities around them,” he says. “Because everybody lives fairly close to one unless you live way, way, way out in the suburbs.”
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.
“I think people just need to be patient, and eventually it will work and it will be a great program,” Fireman says.