By Eugene T. Lowe
September 13, 2004

During his acceptance speech at the Republican National Convention, President George W. Bush announced a new initiative that he would push — "Opportunity Zones." The president said: "In this time of change, opportunity in some communities is more distant than in others. To stand with workers in poor communities — and those that have lost manufacturing, textile, and other jobs — we will create American opportunity zones. In these areas, We'll provide tax relief and other incentives to attract new business, and improve housing and job training to bring hope and work throughout all of America."

The White House is now providing more details on the president's proposal. The most obvious question is how will Opportunity Zones differ from existing Empowerment Zones (EZ), Enterprise Communities (EC), and Renewal Communities (RC). The White House says that 40 Opportunity Zones (28 urban zones and 12 rural zones) would be a "comprehensive, results' based approach, expanding the focus of assistance beyond economic activity to encompass education, job training, affordable housing, and other activities..." Moreover, existing empowerment zones, enterprise communities, and renewal communities could apply to become an Opportunity Zone.

Those communities becoming an Opportunity Zone would move to the front of the line for federal assistance in certain program areas. These would include:

• 21st Century After-School, Early Reading First, and Striving Readers funding;
• Community Based Job Training Grants;
• Community Development Block Grants, Economic Development Administration grants, and HOME Funding;
• USDA Telecommunications Loans, Distance Learning and Telemedicine grants, and Broadband loans; and
• New Markets Tax Credits.

In addition, there would be other incentives that would stimulate growth and create jobs by encouraging businesses to locate in the Opportunity Zones. Such incentives would include lower tax rates on small business income, an extra $100,000 (on top of what is allowed in current tax policies) in expensing for purchases of tools and other equipment, a unified tax credit (a combination of Work Opportunity and Welfare to Work tax credits) that would encourage the hiring of people in the Zone and welfare recipients, and a possible reduction in regulatory and paperwork burdens for the Opportunity Zones by the Office of Management and Budget (OMB).

To qualify to become an Opportunity Zone, a community would have to fit one of two categories: (1) Rural or Urban "Communities in Transition" or (2) Existing Empowerment Zones, Enterprise Communities, or Renewal Communities. The Rural or Urban "Communities in Transition" would be those areas that have "significant decline in the economic base, including a decline in manufacturing and retail establishments, within their community over the past decade and would benefit from targeted assistance in transitioning to a more diverse, 21st century economy." The Existing Empowerment Zones, Enterprise Communities, or Renewal Communities have received their designations based on high poverty rates, high unemployment and low incomes. But with an Opportunity Zone designation they "would be eligible for the expanded benefits available to Opportunity Zones." According to the White House press release, "examples of areas that might qualify to compete for an Opportunity Zone designation include Winnebago County, Illinois; Cuyahoga County, Ohio; and Erie County, Pennsylvania."

Communities would have to qualify to become an Opportunity Zone and then enter an application in a competitive selection process. Each community would have to develop a "Community Transition Plan" which would set "concrete, measurable goals for reducing local regulatory and tax barriers to construction, residential development and business creation. "