Connecting Colleges and Communities with the Resources to Spur Economic Growth – An Interview with Opportunity Alabama
A few years (and COVID variants unfortunately) have come and gone since we first heard the term “Opportunity Zone” (“OZ”). I know we’re all still trying to process 2020, but let’s go way back to the prehistoric, pre-COVID days of 2017 to take a look at the Opportunity Zone Program – how it started, how it’s going and how it’s relevant to Higher Education. We sat down with our partners and friends over at Opportunity Alabama (“OPAL”) to understand the intersection of Opportunity Zones and Higher Education and, unsurprisingly, quickly found ourselves deep in the fascinating and complex world of impact investing and economic development. But before we get into it all, a little background and context for Opportunity Alabama.
OPAL is Alabama’s very own, nationally recognized OZ non-profit organization with the expertise and mission to “bring investors, opportunities, communities and key institutional supporters together for the purpose of generating real returns while improving economic vitality and quality of life in low-income and underrepresented communities across Alabama.” While Opportunity Zones may have inspired OPAL’s birth, OZs are just one of the many tools in its toolbox. What else is in this “toolbox?” And what exactly is OPAL building (or repairing) with it? These questions transition nicely into my conversation below with Opportunity Alabama’s Chris Frye.
Opportunity Alabama recently launched the Apex Project, which is a really helpful resource and guidebook for higher educational institutions nationwide to learn about how to engage in Inclusive Economic Development in their community. Since OPAL released the Apex Project last September, how have you seen the resource be used?
We received a grant from the Lumina Foundation to put this resource together and to make it available to colleges and universities across the country. Our hope, and vision, is that an institution, in using the tool, might reach out and want to learn about what OPAL is doing, what’s happening in Alabama, and how they could be a part of investing in their own community. Our focus is working with higher education in the state of Alabama, but as a state-wide non-profit, we desire to make and grow connections across the nation as well.
At Opportunity Alabama, we see our role as helping communities identify opportunities for public and private investment, and to accelerate the process by which that investment takes place. Our focus area is sourcing capital for economic development projects. With Alabama being one of the poorest states in the country, a lot of projects would not go forward without a combination of public and private investment. You certainly see that in student housing, particularly if the market offers rental rates which are unaffordable (or inaccessible) to students, or if the student demographic is particularly price sensitive. Our primary stakeholders are (1) communities themselves (counties/cities in Alabama), (2) project sponsors (could be anyone/any entity from a commercial tenant to a real estate developer or even a University or college), and (3) investors (national fund, state fund, USDA, EDA, OPAL’s own fund, etc.). So, we exist to connect investors to projects that meet expressed community needs in Alabama.
You made the distinction that OPAL does not provide strategic planning for communities. Can you help us understand what this means in light of OPAL’s Community Growth Accelerator program?
The mission of the Community Growth Accelerator (“CGA”) is to help communities identify opportunities for public and private investment and accelerate the process by which that investment takes place. Oftentimes, a community already has a strategic plan in place and have identified the areas of need. We come in and help create a financially viable project and source capital to bring it to life. For example, if there’s a food access need, we will help design a farmer’s market program and support the community in applying for a grant; if a community has a building in need of redevelopment, we’ll help build a capital stack and bring in external partners with an expertise in that area (such as historic tax credits). The acceleration of that process comes through connecting communities to resources they may not know about. There are so many communities with great assets doing great work, but they are working in silos. We see ourselves serving as an intermediary between communities and the variety of state and national resources out there. For example, through the Community Growth Accelerator, we learned that the city of Gadsden, AL wanted to start an incubator program for local entrepreneurs. We introduced them to the leading expert on rural tech incubation CORI (Center on Rural Innovation). CORI is a 501(c)(3) nonprofit organization headquartered in Vermont that partners with rural leaders across the country to build digital economies that support scalable entrepreneurship and lead to more tech jobs in rural America. CORI is going to help structure the program in Gadsden, then OPAL will help apply for the grant. We’re not experts in rural tech, but we are experts in sourcing capital in Alabama. In this example, we’re leveraging our network of communities in Alabama and our network as a statewide organization to groups outside of Alabama and bringing these groups together. We put together strategies if we see that a few steps need to take place before applying for a grant or raising capital for a project. But we are foremost implementation partners helping with the tax credit process, going after a federal grant, sourcing a developer, etc.
With your name being “Opportunity” Alabama, we’re very curious about the Opportunity Zones program. How many of your deals involve Opportunity Zones?
Speaking from my experience with smaller, rural communities, OZs are definitely helpful but they’re not going to “change the game” for an under-resourced community. An Opportunity Zone is a good tool for an investor who already believes in the community but without a broad coalition of investment tools, the deal is not going to happen. What’s more important than whether or not a site/community is in a Qualified Opportunity Zone is the presence of a “coalition,” a group of people from various disciplines in a community willing to work together on a project. Regardless of a community’s size and level of investment, having a coalition of people with a shared vision is essential to a project’s success. For example, we’re working in Fayette, Alabama right now, and although the city has only 5,000 people, they have a coalition of leaders in the community all unified and committed to increasing food access. Birmingham and Huntsville are seeing a lot of growth right now and I think that’s the result of good visioning that has been done – both for the cities as a whole and in pockets all around. And at a certain point you don’t need that vision anymore because it’s just a part of the city. All that to say, OZs are an important and helpful tool, but before you open your toolbox, you need to have a good team together.
Is OPAL working on any projects involving Higher Education?
Anywhere there’s a higher education institution, it’s a huge asset. Montevallo, a 6,000-person town, has the University of Montevallo — a public arts college – what an incredible asset that is! They have an institution bringing people from all over the country to their community – about 3,000 students every year living and spending money in Montevallo for nine months doing really cool stuff. Anytime we’re doing catalytic real estate development projects, the local higher education institution is almost always a partner and in some cases is the driver of the project. The University of West Alabama in Livingston and Miles College in Birmingham’s backyard in Fairfield are both huge drivers of regional economic development. Case in point, OPAL’s first HBCU partner, Miles College has its own Community Development Corporation (CDC) and we’re working with them to build more housing at various levels of affordability to support the growth of the college. The ultimate vision is to make Miles College the economic development and entrepreneurship hub of Western Jefferson County, but in order to execute this vision, Fairfield needs more housing.
What’s the future of the OZs?
I believe there are some members of Congress that have introduced a bill to reform the program, making it work better for underinvested communities through reporting requirements and focusing on impact. Not sure where that bill is on Congress’ priority list in an election year, but there is definitely bipartisan support for reforming the program.
With the other half of your name, Alabama, we know that OPAL is focused on Alabama. How might a non-Alabama institution connect with a resource such as yours in their community / state?
The reason Opportunity Alabama exists is because there was not a lot of state-wide activity around economic development in this way [expanding financial capacity of local communities]. A lot of states already have the infrastructure in place that OPAL is now filling in Alabama. I would encourage your readers who may not be located in Alabama, to get in contact with their local economic development representative who can then connect them to a local Community Development Financial Institution (CDFI) which might be operating in their local community or state-wide. CDFI’s typically have a variety of programs to serve residents, housing, business, etc.
Affordability for students is often a driving factor in on-campus student housing, how might an OZ help a campus better reach that goal?
I like to use the term “accessible” over “affordable” because affordable has a technical meaning for municipalities. Achieving the goal of affordability in rental rates has less to do with Opportunity Zones and more to do with other factors, including zoning, construction costs and the types of housing being built. The Opportunity Zone encourages investors to direct their capital gains into projects in Opportunity Zones for deferred and reduced taxes on the back end of their investment. For example, in downtown Birmingham, the American Life Building used a combination of Historic Tax Credits (HTC’s) and Opportunity Zone equity investment. The Historic Tax Credits saved a significant amount in the renovation costs to create accessible rental rates to Birmingham residents in the median income range, while the OZ allowed for some cheaper equity to enter the deal. Maybe old dorm buildings could be eligible for Historic Tax Credits. Every state is different with what tax incentives are offered on top of federal incentives. Alabama has both a federal and state HTC, but not a low-income housing credit like some states. So, if an institution discovers that their state offers both state and federal Historic Tax Credits, that would really help lower the rental rates for students. The best way universities can work towards accessible housing for their students is to be intentional about how they use the land they own and thoughtful about zoning. For new builds, it’s all about what is the most economically efficient type of housing that is allowed to be built by zoning laws.
About Chris Frye
Chris Frye is the Director of Portfolio Development at Opportunity Alabama. Chris leads OPAL’s community development work and helps communities scale tangible economic development projects. Prior to joining OPAL, Chris was a financial analytics consultant for a New Orleans-based marketing firm as part of the Venture for America program, a two-year entrepreneurship fellowship where participants commit to spending two years working at a high-growth company in an emerging startup ecosystem. He has also worked in the Office of the Mayor of New York City and built houses for Habitat for Humanity in New Orleans. Chris earned his bachelor’s degree from the University of Maryland, College Park and has been fortunate enough to live in some of America’s greatest cities: Baltimore, Washington D.C., Brooklyn, New Orleans and now Birmingham.