Role # 3
Philanthropies can play a market making role by supporting the collection of market data, advancing the conduct of market research and catalyzing the investment of patient and impact capital. As discussed above, an Investment Prospectus is written initially to unveil competitive assets and attract private capital that is enticed by federal tax incentives. But the Prospectus does not solely focus on private investors.
The transactions that most cities seek to drive inclusive growth (e.g., investments in workforce housing and local businesses) will require a blended “capital stack” of debt, subsidy and equity. Cities will, therefore, need to align broader pools of public, private, civic capital and create new forms of innovative financing that can be captured, codified and transferred from city to city. Weak market cities will also need to create business demand by increasing employment density within nodes of Opportunity Zones (e.g., the downtown initiative pursued by Erie, PA).
The major observation here is that wealth doesn’t just reside in technology capitals like Silicon Valley or New York City but is distributed across the nation. To this end, cities do not have a capital problem but an organizing challenge and the Investment Prospectus is an impetus for unlocking local wealth and driving smarter local investment and location decisions.
Opportunity Zones could catalyze the aggregation of smart public, private and civic capital for multiple purposes. Smart public and civic investments in community infrastructure (e.g., parks, libraries, broadband) and human capital can provide a foundation and platform for private sector investment. In low-demand cities and Opportunity Zones, smart public, private and civic financial instruments (e.g., subordinated debt, recoverable grants, impact investing) can attract and de-risk tax advantaged capital to move markets. Certain typologies of Opportunity Zones (e.g., central business districts, hospital districts, industrial districts, residential communities) might even become the focus of organized funds that operate across cities, diversifying risk and enhancing Opportunity Fund performance.