Opportunity Zones are a chance for us to rebuild rural America

Opportunity Zones are a chance for us to rebuild rural America
© Getty Images

 

Buried deep in the Tax Cut and Jobs Act of 2017 is an interesting prospect for struggling communities. A new program, which calls for governors to establish Opportunity Zones in their states, is meant to encourage private investment in low-income regions across the country.

More specifically, it creates tax incentives for investment in areas that meet the same low-income criteria as the New Market Tax Credit (NMTC) program, although only 25 percent of NMTC tracts in a state can be selected. State governors have been instructed to make their designations by mid-March.

ADVERTISEMENT
With this program comes the chance to kickstart economic recovery in regions experiencing a significant opportunity divide: rural America. There is a disparity between urban and rural economies in America that continues to widen.

 

Whereas most metro areas have seen a strong recovery since 2009, with employment exceeding pre-recession levels, rural economies have largely stagnated or are in crisis.

Many large employers in the manufacturing sector have left small towns, and entrepreneurship and investment have declined as well. Less than 1 percent of venture capital dollars now go to rural entrepreneurs.

The repercussions of this economic decline are as troubling as they are wide-ranging. Young people with college degrees are moving to urban areas at an unprecedented rate, leading to the first ever net population decline in non-metro areas in recent history.

Individuals in non-metro areas are 43 percent less likely to have a bachelor’s degree than their urban counterparts. And rural communities are facing an opiate epidemic never seen before, with the rate of opioid overdose deaths 45 percent higher in rural areas than urban.

Finally, the advent of automation in the farming, manufacturing and transportation sectors has hit rural areas disproportionately, eliminating a significant number of jobs and putting many more at risk.

The Opportunity Zone program could be just the catalyst rural areas need to bounce back. However, as Jim Tankersley noted in the New York Times, “Risks remain, including whether investors will steer dollars toward areas that really need investment.”

In order to maximize the program’s uptake and impact, governors must allocate their Opportunity Zones strategically. First, in order to fulfill the full potential of the legislation to build a balanced economy, it is critical that they select a significant proportion of rural tracts.

Second, in order attract capital into the program, they should select communities that not only suffer from economic distress but also have unique, unrealized potential for growth.

This potential is real. Many rural communities present overlooked yet compelling opportunities for smart investment and economic renewal. Historic rural downtowns offer beautiful homes and authentic work spaces at a fraction of urban costs and come with immediate access to natural beauty, clean air and fresh produce.

University and college campuses in rural regions provide the foundation for tech transfer and knowledge economy jobs. From the Center for Innovation and Entrepreneurship at the Colorado School of Mines in Golden, Colorado, to the Dartmouth Entrepreneurial Network in Hanover, New Hampshire, to the Ohio University Innovation Center in Athens, Ohio, rural university resources often drive local and regional economies. Even schools without dedicated entrepreneurship resources generate talent and ideas that keep their local economies vibrant.

It’s also surprising how many small towns across the country that have built fiber to the home in recent years, now enjoying gigabit-speed internet that surpasses most urban offerings. Some towns, like Williamstown, Ky. (population 3,900), received a federal broadband grant.

Others developed fiber networks under a municipal utility model, like the Powell Fiber Optic Network in Powell, Wyo. (population 5,700), or crowd-funded the effort, like RS Fiber in central Minnesota. This infrastructure allows entrepreneurs to access customers, partners, and world class computing power from anywhere.

Unfortunately, with so much attention on the urban core over the past twenty years, research on rural economies has dwindled, as have programs that foster rural economic revitalization. Economic diversification through entrepreneurship as well as connections to knowledge economy jobs are critical for building resilience in rural economies.

Governors should therefore work to identify towns that are struggling economically, but have underutilized assets that constitute the building blocks for future success.

Take Springfield, Vt., with the population 9,300. Once known as the “machine tool capital of America” due to its leadership in the precision manufacturing sector, Springfield now resembles many other struggling post-manufacturing towns in America, with 30 percent of the population on public assistance and about half of children on free and reduced lunch programs.

However, the town has ten gigabit internet connectivity to the home from a federal grant, and magnificent, underused and under-valued buildings — a legacy from the town’s opulent past. Springfield is forty minutes south of Dartmouth College, in a NMTC-eligible census tract. With investment, it could become a regional economic leader once again.

All around the country are towns with similar potential. Take Oskaloosa, Iowa, a town near Grinnell College with gigabit connectivity to the home, or Platteville, Wisc., home to a state university campus and an excellent engineering program.

Governors have a big job to do and less than two months to do it. As they consider their Opportunity Zone designations, the stakes are high. Their decisions will influence the direction of billions of dollars of new investment in struggling communities across the country. With a holistic approach that includes rural areas, they could usher in a new era of rural economic renewal.

Matthew Dunne is the founder and Executive Director of the Center on Rural Innovation. He previously spent 8 years leading Community Affairs for Google, where he worked with rural data center host communities. He also represented a rural district in the Vermont State Senate and was Director of AmeriCorps*VISTA during the Clinton administration.