Dr. John Fleming
U.S. Assistant Secretary of Commerce
For Economic Development
Space Coast Opportunity Zones Forum
L3Harris Corporate Headquarters
Tuesday, January 7, 2020
[As Prepared for Delivery]
Thank you, Barry, for the kind introduction and thank you for your service to President Trump and Secretary Chao.
It’s great to be working with you today!
I’d like to thank my friend and colleague Scott Turner and the White House Opportunity and Revitalization Council for inviting me to speak today.
Since I joined the U.S. Department of Commerce team in March of last year, I’ve had the privilege of working closely with Scott, the Council, and many of the federal representatives here with us today.
The coordinated effort that we have undertaken to inform and learn from communities and investors as they work through the Opportunity Zones initiative to drive private investment to some of our nation’s most in-need communities is critical and has been personally rewarding.
I’d like to acknowledge all of you who have joined us here today from Melbourne and from throughout Florida’s Space Coast region.
We have an amazing turnout here today, which speaks volumes to the importance of the Opportunity Zones initiative to both investors who are making impactful deals and economic developers who are working to help transform our nation’s distressed communities.
As an entrepreneur who started a suite of diverse businesses and commercial real estate ventures in 1985 that have grown across three states and created hundreds of jobs in the private sector, I’m passionate about economic development and the role that government can play in helping foster the conditions for private sector capital investment and job creation.
Doing good while also doing well has long been a challenge for investors who rightly pursue profitable investments, but also want to improve the world they live in.
Opportunity Zones is proving to be a unique investment vehicle that is helping to do just that.
Again, thank all of you for your participation and interest and for starting the New Year here!
As we enter 2020, there is a lot to be excited about in the world of Opportunity Zones.
Shortly before the holiday season got underway, we received word that the Treasury Department and IRS had issued final regulations implementing the Opportunity Zones tax incentive.
The final rules provide clarity for Qualified Opportunity Funds and their eligible subsidiaries in determining qualification and levels of new investment in Opportunity Zones.
They also provide guidance regarding the types of gains that qualify for Opportunity Zone investments, as well as gains that may be excluded from tax after a 10-year holding period.
The implementation of the final rules, combined with the now more than 200 Opportunity Zones focused policy actions that federal agencies have implemented since the Tax Cuts and Jobs Act was signed into law two years ago, paves the way for significant Opportunity Zone investment to continue to be made this year and moving forward.
So where does the agency I represent, the U.S. Department of Commerce’s Economic Development Administration, or EDA, fit into the picture?
As the only federal government agency focused exclusively on economic development, EDA makes investments in economically distressed communities to create jobs, promote innovation, and accelerate long-term growth.
Our mission, therefore, fits hand in glove with the goal of the Opportunity Zones initiative, which is also focused on driving transformative private investment into distressed communities.
The fact is, even though our nation is experiencing the most significant economic expansion we’ve seen in decades thanks to the policies that President Trump has initiated, there are still communities that are being left behind.
These communities may be impacted by the loss of a major employer, they may be suffering from the downturn of an entire economic sector as we see in coal country, or they may have been impacted by natural disasters like hurricanes, tornadoes, floods, or wildfires.
To help communities respond to economic plight, EDA’s budget has historically averaged about $320 million a year.
With these taxpayer funds, EDA makes investments to catalyze locally-driven planning, technical assistance, and infrastructure strategies designed to spur economic development.
I’d like to emphasize that EDA does not go into communities preaching a Washington-knows-best sermon.
Rather, we support impactful, well-thought out, locally-devised strategies designed to make it easier for businesses to start and grow.
Now, while our budget has average $320 million or so annually, in Fiscal Years 2018 and 2019, EDA received a total of $1.2 billion in supplemental disaster appropriations from Congress to help regions recover from economic harm and distress resulting from natural disasters occurring in 2017 through 2019.
With these funds, communities and regions hit hard by major disasters in the United States are rebuilding stronger, more resilient economies and EDA is pleased to help them achieve their goals through the supplemental appropriations.
In total, I am proud to report that since January 2018, EDA has invested nearly $347 million in 239 projects in or near Opportunity Zones across the United States. Many of these grants have been awarded to Opportunity Zones that have also been stricken by natural disasters.
Here in Florida, since January 20th, 2017, EDA has invested more than $100 million in 60 projects, including more than $16 million in 8 projects that support Opportunity Zones.
This EDA assistances has helped communities and regions build the capacity for economic development.
Examples of Opportunity-Zone related investments that EDA made in Florida last year, include:
- A $1.25 million grant to Tallahassee Community College to help establish their Welding Technologies Laboratory.
- A $2.4 million grant to Florida Gateway College of Lake City to support the construction of the Gateway College Commercial Vehicle Driving Vocational Training Facility.
- We also invested $7.5 million in the Pinellas County Board of Supervisors of Clearwater to help spur entrepreneurial development by helping to build the Tampa Bay Innovation Center Incubator.
- And, a $4.8 million EDA investment in Santa Fe College in Gainesville is helping to re-build and expand their Center for Innovation and Economic Development.
An important note, each of these projects in Opportunity Zones were funded under the supplemental appropriation we received from Congress to help communities impacted by natural disasters in 2017.
Making investments in Opportunity Zones is one of the major roles we have been playing in the initiative. Why is this important?
We have seen that Opportunity Zone investors magnify the amount of private investment that can be directed to these distressed areas, and have the potential to increase EDA’s ROI, which has been $15 for every $1 we’ve invested, by 5-fold, 10-fold, 25-fold, even 1,000 times, and more.
This is significant!
To help further spur investment in Opportunity Zones, EDA is proud of the significant policy actions we have implemented to help our stakeholders take advantage of the Opportunity Zones initiative.
For example, in July 2018, EDA issued a Notice of Funding Opportunity - or NOFO - that made Opportunity Zones eligible for funding from EDA through our special needs category.
While the vast majority of Opportunity Zones qualify under EDA’s distress criteria, this designation captured and made eligible the remaining zones.
In addition, in June 2019, EDA added Opportunity Zones as an Investment Priority, which has increased the number of catalytic Opportunity Zone-related projects that we can fund.
These two policy changes mean that regardless of EDA’s economic distress criteria, if a grantee applies for funds for a project in one of the nation’s more than 8,700 Opportunity Zones, including Florida’s 427, EDA will automatically consider the application.
This does not mean the application will get approved, however, the project will receive full consideration.
Now, as I mentioned earlier, EDA has been working closely with Scott as part of the White House Opportunity and Revitalization Council to highlight EDA’s role in the initiative at Opportunity Zone roundtables like this and at other conferences and gatherings that bring together local elected officials, business leaders, community groups.
It has been a fantastic and rewarding experience and I look forward to continuing this engagement in 2020.
In addition to this outreach, EDA’s Director of External Affairs and Communications, Joel Frushone, who many of you may have heard speak earlier this morning on the Leveraging & Integrating Federal Programs panel, has been leading an EDA Opportunity Zone state engagement effort.
Through this work, we are learning all we can about how states are supporting Opportunity Zones, where the best practices are, where the challenges are, and to explain EDA’s role and the assets we have.
We have seen state and local governments that are offering their own Opportunity Zones tax incentive packages. We are also making communities and investors aware of other incentives to stack on top of the federal tax incentive.
Critically, today, governors, mayors, and other community leaders are including Opportunity Zones in their economic development strategies and we encourage them to offer their own Opportunity Zone tax incentive packages to compliment the federal Opportunity Zone tax incentives.
To conclude, the Trump Administration believes, and so do I, that the sky is the limit when it comes to how the Opportunity Zones initiative can benefit investors and transform distressed communities. That is why we are here with you and committed to helping make the initiative a success.
At EDA, we are seeing real impact start to emerge and we look forward to working with all of you to maximize the benefits of this important and historic initiative.
I thank you again for your interest and participation. It is because of you that this initiative is so successful.